Stocks rose on Wednesday as unexpected increases in home sales and orders for durable goods fueled hopes the economic downturn may have found a bottom, lifting shares of big manufacturers, banks and home builders.

U.S. data for February showed new-home sales unexpectedly rose at their fastest pace in 10 months, and orders for long-lasting manufactured goods rose for the first time in seven months.

Shares of homebuilders Lennar and DR Horton rose 12.4 and 11.7 percent respectively, while the Dow Jones home construction index <.DJUSHB> added more than 7 percent.

The durable goods data fired up shares of companies such diversified manufacturer 3M , a top boost to the Dow industrials and up 2.9 percent at $49.77.

I think this market is very emotional right now and it's rallying on any positive news we can get, said Dan Faretta, senior market strategist at retail brokerage Lind-Waldock in Chicago.

We're starting to see a bottom in bad news. We're slowly starting to see more positive news and the more we see that the more we're going to see these rallies.

The Dow Jones industrial average <.DJI> gained 147.51 points, or 1.93 percent, to 7,807.48. The Standard & Poor's 500 Index <.SPX> rose 13.75 points, or 1.71 percent, to 819.87. The Nasdaq Composite Index <.IXIC> added 23.43 points, or 1.54 percent, to 1,539.95.

The financial sector extended its recent rise, after faltering on Tuesday, and led the S&P higher. Bank of America rose 9.5 percent to $7.83, while JPMorgan was a top boost to the Dow adding 7.3 percent to $28.14.

The KBW bank index <.BKX> is up about 60 percent from its recent low set March 6.

Financial shares also got support from a report that showed U.S. mortgage applications jumped last week as record low interest rates spurred a surge in demand to refinance home loans.

Shares of energy companies also lifted the market. Blue-chip Exxon Mobil added 1.8 percent to $70.60.

Stocks have rallied in recent weeks, including a 7 percent jump on the S&P 500 on Monday, as policy makers unveiled moves aimed at shoring up the economy.

(Editing by Leslie Adler)

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