Orders to American factories for big-ticket manufactured goods fell in July for the third time in the last four months. But in brighter news, sales of new homes last month surged by 4.9 percent, the biggest gain this year. 

The weakness in manufacturing continued to reflect slumping demand by businesses for new equipment. This weakness, however, has been offset by continued strong consumer demand which so far has been enough to keep the yearlong economic slowdown from turning into a recession. 

On Wall Street, stock prices were rising. After the first hour of trading Friday, the Dow Jones industrial average was up 98 points and the Nasdaq index had gained 40 points. 

The Commerce Department said Friday that sales of new homes in July were up by the largest amount since a 13.5 percent increase last December. The July increase followed a revised 2.8 percent sales gain in June and pushed sales of single-family homes to an annual rate of 950,000 last month. 

The sales gains in July were led by an 18 percent surge in sales in the Northeast. 

Analysts expect the strength in housing to continue, reflecting the fact that mortgage rates have returned to their lows of March with 30-year mortgages once again dropping below 7 percent. 

Meanwhile, the department also reported that new orders for durable goods dropped 0.6 percent in July following an even bigger 2.6 percent fall in June. Orders for durable goods, items expected to last three or more years, have fallen in three of the last four months as manufacturers continue to struggle with a mountain of unsold products. 

The Federal Reserve cut interest rates for a seventh time on Tuesday, hoping that lowering borrowing costs will stimulate increased demand and keep the country out of a recession. 

Most economists believe the Fed formula, combined with nearly $40 billion in tax rebate checks, will work to boost demand and allow American manufacturing companies to halt production cutbacks that so far have resulted in more than 800,000 lost jobs over the past year. 

While the Bush administration is hoping that rebound will begin in the current quarter, Friday's report showed that manufacturers were beginning the July-September quarter facing the same falling demand they had endured in the second quarter. 

The report said that July's weaknesses were led by a 4.4 percent drop in new orders for computers and related high-tech products. Weakness at technology companies have been blamed for much of the economy's overall troubles since last summer. The big drop last month occurred in demand for semiconductors, which fell by 12.4 percent. 

However, within the broad computer category, companies making communication products reported a hefty 18.3 percent increase in orders, only the third rise this year, and the biggest gain for this sector in 13 months. 

New orders for transportation equipment also managed a 1.3 percent increase in July, reflecting a 3.8 percent increase in demand for autos and parts. 

Excluding the strength in transportation, new orders would have fallen by an even bigger 1.4 percent in July, the fourth decrease in the last five months. 

Excluding products destined for the military, new orders would have fallen by 1 percent. 

The overall decline of 0.6 percent pushed new orders for durable goods down to $182.02 billion in July. 

The housing report showed that the average price for a home sold in July was $208,400, down slightly from a $208,600 average sales price in June. 

The 18 percent increase in sales in the Northeast pushed the annual sales rate to 72,000 in that region. Sales rose 6.9 percent in the Midwest to an annual rate of 187,000. The West saw sales rise 4.6 percent to a 250,000 annual rate while sales in the South were up 2.3 percent to an annual rate of 441,000 homes.