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Stocks close higher. Microsoft surges.

Stocks rose on Wall Street Friday with a big jump in Microsoft lifting the Dow Jones Industrial average. Stocks stumbled at mid-morning after the government reported a plunge in new home sales, then drifted steadily higher in the afternoon.

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A boom in housing has supported this year's rally in stocks. Now, the drop in sales has traders worried that the U.S. housing recovery could falter because of higher mortgage rates.

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Traders reacted to the drop in home sales by buying bonds and gold, investments that become more attractive when the economy appears weaker.

The yield on the 10-year Treasury note declined to 2.82 percent from 2.89 percent late Thursday. The price of gold rose $25, or 1.8 percent, to $1,395 an ounce, the highest in two months.

The stock market may become more volatile in the coming weeks as traders try to anticipate the timing of the Fed's move, said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

Investors will also start to follow the debt ceiling debate in Washington more closely, he said. The U.S. stockmarket plunged in the summer of 2011 when policy makers wrangled over lifting the borrowing limit and pushed the country closer to default.

"The softening we are seeing in the market, and the rise in interest rates, these are all in anticipation of these issues," Frederick said. "Overall, I like the outlook for the rest of the year, I just don't like the next four to six weeks."

The Standard and Poor's 500 index edged up 6.54x points, or 0.4 percent, to 1,663.50.

The Nasdaq composite rose 19.09 points, or 0.5 percent, to 3,657.79. The Nasdaq exchange was closed for most of the afternoon Thursday due to a technical glitch.

The S&P 500 has fallen almost 3 percent from its record close of 1,709 on Aug. 2, but is still up 16 percent for the year. The Dow fell for six straight days through Wednesday, its longest losing streak of 2013. It's still up 15 percent for the year.

Among other stocks making big moves:

— Microsoft rose $2.36, or 7.3 percent, to $34.75 after Ballmer's retirement was announced.

— Pandora Media, the online music streaming company, slid $2.80, or 13 percent, to $18.91 after the company issued a disappointing profit outlook for the current quarter.

— Aeropostale slid $2.22, or 20 percent, to $8.76 after the teen retailer reported dismal quarterly results and issued a weak profit forecast. Several other teen retailers including Abercrombie & Fitch and American Eagle Outfitters have also reported poor customer traffic and slumping sales.

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