By Leah Schnurr
NEW YORK (Reuters) - U.S. stocks staged a comeback on Wednesday, breaking a four-day losing streak by major indexes, as key technical support triggered bargain hunting to offset weak economic data.
The S&P 500 index sagged as much as 1 percent early as data showed new single-family home sales slumped to a record slow pace in July and orders for manufactured durable goods rose far less than anticipated.
But positive momentum grew through the session after the benchmark S&P 500 bounced back from a breach of the 1,040 level. In the past that level has held up as support, indicating some investors may see a dip below it as a buying opportunity.
Investors who hold short positions -- those who seek to profit from a declining share price -- pushed markets higher as they covered their bets to lock in profits after the recent slump.
Technical factors played more of a role than economic fundamentals as data showed a deteriorating pace of recovery.
"Overall this is still a very careful market," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
"Until we see a package of decidedly positive data, this market is going to be vulnerable."
Healthcare stocks, among the least sensitive to economic swings, outperformed the overall market, while homebuilders gained despite the weak data after Toll Brothers Inc
The Dow Jones industrial average <.DJI> rose 19.61 points, or 0.20 percent, to 10,060.06. The Standard & Poor's 500 Index <.SPX> added 3.46 points, or 0.33 percent, to 1,055.33. The Nasdaq Composite Index <.IXIC> gained 17.78 points, or 0.84 percent, to 2,141.54.
Coventry Health Care Inc
Toll rose 5.8 percent to $17.13, while the Dow Jones homebuilders index <.DJUSHB> gained 3.7 percent.
Financials also cut losses after the KBW bank index <.BKX> briefly hit 42.70, its lowest level in 2010. The index slipped 0.4 percent and has lost 6 percent in the last week.
The Nasdaq fared better than the other two main indexes, boosted by Apple Inc
Bill Strazzullo, partner and chief investment strategist at Bell Curve Trading in Boston, said the gains were unlikely to be sustainable, with the S&P facing resistance at 1,060.
"It doesn't change my view that at least in the short term,
momentum is still down," said Strazzullo, who expects the S&P could test July intraday lows around 1,010.
On the downside, energy shares dragged on the S&P 500 as coal mining stocks dropped on concerns that power plants would switch to natural gas from coal as the price of gas fell.
Massey Energy
(Reporting by Leah Schnurr; Editing by Kenneth Barry)
