Wall St advances as durables data reduces Fed worry

By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks advanced modestly on Monday after sharply weaker orders for long-lasting manufactured goods eased investors' worries that the Federal Reserve would soon begin to scale back its economic stimulus.

Durable goods orders dropped 7.3 percent in July, the biggest decline in nearly a year. In addition, a gauge of planned business spending on capital goods tumbled, casting a shadow over the economy early in the third quarter.

The reports and other data for July have suggested economic growth this quarter will probably not accelerate as much as economists had hoped.

Investors were heartened because the Fed has said any decision to slow its $85 billion a month in bond purchases, which has helped drive the S&P 500 index's rise of nearly 17 percent this year, depends on a recovering economy.

"Clearly the durable goods number, particularly if you dig down in there, was not encouraging," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

"If there is anything that is driving the markets today, it is that the durable goods numbers were weaker than expected and that raises the question the Federal Reserve might not begin to taper."

The benchmark 10-year U.S. Treasury note yield hit its lowest in a week following the data. A recent spike in yields has raised concerns that mortgage rates and consumer credit will climb too high and harm the economy's recovery.

The Dow Jones industrial average rose 29.41 points or 0.2 percent, to 15,039.92, the S&P 500 gained 4.31 points or 0.26 percent, to 1,667.81 and the Nasdaq Composite added 22.747 points or 0.62 percent, to 3,680.539.

Amgen Inc was the biggest boost to both the S&P 500 and Nasdaq 100 indexes after it struck a deal to buy cancer drug maker Onyx Pharmaceuticals Inc for about $10.4 billion, sweetening its original offer made in June.

Onyx shares rose 5.7 percent to $123.62 and Amgen jumped 9 percent to $115.12. The NYSEArca biotech index climbed 2.4 percent.

U.N. chemical weapons experts interviewed and took blood samples from individuals in a suburb of Syria's capital where rebels said the government carried out a poison gas attack last week. The inspectors' convoy came under fire.

Washington was all but certain that the government of President Bashar al-Assad had gassed its own people.

Three sources familiar with the deal said on Monday that Pratt & Whitney, a unit of United Technologies Corp , has reached agreement in principle with the Pentagon on a contract to build engines for F-35 Joint Strike Fighters in a deal valued at over $1 billion. United Tech shares edged up 0.4 percent to $103.23.

In another deal, the Pritzker Organization said it will acquire scrap metal broker TMS International Corp for $17.50 a share, a premium of about 12 percent to TMS's Friday close of $15.57. shares gained 12.1 percent to $17.46.

(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)