* Chevron, Exxon boost Dow as oil prices rise on supply
* Britain seeks U.N. authorization for military action
* Homebuilder shares fall after decline in pending home
* Indexes up: Dow 0.3 pct, S&P 0.3 pct, Nasdaq 0.4 pct
By Ryan Vlastelica
NEW YORK, Aug 28 (Reuters) - Wall Street rose on Wednesday
as energy shares rallied on higher oil prices as the United
States and its allies edged closer to military action against
Trading volume was thin and came after a drop in the S&P 500
index on Tuesday to its lowest in two months.
On Wednesday stocks recouped some of the losses as traders
bought energy stocks, which rose on a spike in oil prices as
markets feared supply interruptions from the Middle East.
Energy shares rose 1.8 percent, by far the biggest
gainer among S&P 500 sectors. Chevron Corp gained 2.5
percent to $121.81 while Exxon Mobil was up 2.3 percent
to $88.84. The two provided the biggest lifts to the Dow
industrials and the S&P 500.
Brent crude gained 1.4 percent while U.S. crude
futures rose 0.4 percent and are up 5.3 percent over the
past five sessions as investors fret any military action could
create supply problems. During the session, oil hit its highest
since May 2011.
"If you want a hedge against Middle East uncertainty, energy
shares will serve you well," said Jim McDonald, chief investment
strategist at Chicago-based Northern Trust Global Investments.
At the U.N. Security Council, Britain sought authorization
for military action for an alleged poison gas attack against
Syrian civilians by President Bashar al-Assad's government. U.S.
officials described plans for multinational strikes that could
last for days.
McDonald, who helps oversee $803 billion in assets, said a
"surgical involvement" by the West appeared more likely than
"broad-scale activity, which is enough to give investors comfort
about the impact of any involvement."
The CBOE Volatility Index, a measure of investor
anxiety, fell 2.4 percent, though it remains up more than 17
percent on the week.
The Dow Jones industrial average was up 48.38 points,
or 0.33 percent, at 14,824.51. The Standard & Poor's 500 Index
was up 4.48 points, or 0.27 percent, at 1,634.96. The
Nasdaq Composite Index was up 14.83 points, or 0.41
percent, at 3,593.35.
Despite the day's rise, the S&P was unable to close above
its 100-day moving average, where it had traded for part of the
session. The index first closed below that level, viewed a sign
of weakening near-term momentum, for the first time since June
24 on Tuesday.
About 53 percent of stocks traded on the New York Stock
Exchange closed higher while 56 percent of Nasdaq-listed shares
Volume was light, with about 4.19 billion shares changing
hands on the New York Stock Exchange, the Nasdaq and NYSE MKT,
below the daily average so far this year of about 6.31 billion
Contracts to purchase previously owned U.S. homes fell for
the second straight month in July, with the decline much wider
"This shows that the increase in mortgage rates has taken
the wind out of the housing market's sails a bit. It's a little
disappointing," said Northern Trust's McDonald.
PulteGroup Inc fell 1.3 percent to $15.38 and D.R.
Horton Inc shed 1.3 percent to $17.77. The PHLX housing
sector index dipped 0.3 percent.
While the rally in energy shares boosted the broader market,
it did have a negative impact on airline stocks. The NYSE Arca
airline index fell 0.8 percent, extending a 3.9 percent
drop in the prior session. U.S. Airways Group fell 0.8
percent to $15.34.
Williams-Sonoma Inc reported second-quarter earnings
that beat expectations. The announcement was unexpectedly
released before the market closed. Shares fell 4.2 percent to
Shares of mining equipment manufacturer Joy Global
fell 4.7 percent to $48.89 after it reported a lower profit for
the third quarter and said orders fell.