Pending sales of previously owned U.S. homes rose unexpectedly in July, an industry group said on Thursday, suggesting a tax credit-related housing market decline was close to bottoming.

New orders received by U.S. factories edged up in July after two straight months of decline on robust demand for new transportation equipment, according to a Commerce Department report on Thursday.

KEY POINTS:

PENDING HOME SALES: * The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in July, increased 5.2 percent to 79.4 from June. * June contracts were revised to show a slightly bigger 2.8 percent decline instead of the previously reported 2.6 percent fall. * Compared to July last year, pending home sales fell 19.1 percent. * Economists polled by Reuters forecast the index would fall 1.0 percent in July.

FACTORY ORDERS: * Total orders rose 0.1 percent to a seasonally adjusted $409.5 billion after falling 0.6 percent in June and 1.8 percent in May. * Economists surveyed by Reuters had forecast a gain of 0.3 percent. * July's rise stemmed entirely from a 12.9 percent jump in transportation orders. * Excluding those, orders dropped 1.5 percent for the sharpest monthly decline since a 2.8 percent plunge in March 2009.

COMMENTS:

HOWARD SIMONS, STRATEGIST, BIANCO RESEARCH, CHICAGO:

We know we are weak and we are not coming out of this in a 'V' shaped recovery. At best we will have an 'L'. Now the next question has to be, does it get worse than the 'L' and turn down lower, and the answer there increasingly seems to be no and that's good news.

What we see in the home sales data and factory orders is all evidence that we are not going to implode and won't go into a double dip, for now.

CHAD MORGANLANDER, PORTFOLIO MANAGER, STIFEL, NICOLAUS & CO, FLORHAM PARK, NEW JERSEY:

The general concern is we are dependent on the economic numbers that come out on a daily basis. There has been a sluggish recovery within the housing numbers across the board and a slowdown in factory orders and manufacturing that gives investors pause. We are going to be range bound until we see a steady improvement in the U.S. economy.

One has to keep a careful eye on the price stability of housing to determine if we are going to continue to be in this disinflationary environment. Any gradual decline within the housing market will put an overall negative bias within the economy and in the markets. The long end of the yield curve is indicating a slow U.S. economy into the second half of the year and into 2011.

ROBERT DYE, SENIOR ECONOMIST, PNC FINANCIAL SERVICES GROUP, PITTSBURGH:

The trend in home sales has to be up from here considering how bad the last couple of months have been. This is a nice sign. We are far from a healthy residential real estate market, thought. It's going to take years at this point before we get back to what we would call a normal market.

There's just so much excess capacity out there that remains to be absorbed.

That said, we have record low mortgage rates, an uptick in consumer confidence, we're starting to see some signs that we're dodging a double-dip recession and I think prospective home buyers will react favorably when they start to digest slightly more positive economic news in the second half of the year.

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY, CRT CAPITAL GROUP, STAMFORD, CONNECTICUT:

A mixed set of data with more attention on the pending home sales, which was stronger than expected versus some of the core elements to factory orders which were weaker than expected.

The bond market is responding in kind with prices little changed to a tad weaker in the belly. Really a non response. The pending sales figure will get some talking about a bottoming in housing, but that's dubious given the new and existing measures of last week and the NAR ratcheting down their outlook. Anyway, the market's not trading this. We remain biased to be neutral and eyeing further cheapening to buy -- but won't be short for it until after nonfarm payrolls.

ZACH PANDL, ECONOMIST, NOMURA SECURITIES INTERNATIONAL, NEW YORK:

There are actually some quite notable positives here with pending home sales stabilizing albeit at a low level, suggesting the worst of the post-tax-credit-bust may be over.

On the factory orders report we had upward revisions to that terrible (previous) durable goods report and you also have a stronger than expected inventory growth, so that will be at least a short term positive for GDP. We're likely to raise our estimate for 3Q GDP by a few tenths of a percent on this.

These are further signs the economy is not slipping into a recession albeit growth still looks quite slow.

JOHN CANALLY, INVESTMENT STRATEGIST, ECONOMIST, LPL FINANCIAL, BOSTON:

The market was braced for a disaster after what we saw with existing sales, so this is positive, while the factory orders looked a little light compared with expectations.

I think the real focus today will be the retail sales and the jobless claims. Retail was better than expected, which I think puts to the sideline some of the fear about a double dip. As for the claims, they've fallen for a couple of weeks in a row, which is encouraging, though I think you need claims below 400,000 to suggest we're getting any sustained growth in job creation.

People are reluctant to do much of anything today except position themselves for tomorrow and digest yesterday's gains.

MARKET REACTION: STOCKS: U.S. stocks extend gains after pending home sales, factory orders data. BONDS: U.S. Treasury debt prices add to losses. DOLLAR: U.S. dollar pares losses versus yen.