*

US single-family housing starts tumble in July

*

S&P 500, Nasdaq set for best week since October

*

Indexes up: Dow 0.27%, S&P 500 0.21%, Nasdaq 0.25%

(Updates to 2:04 p.m. EDT)

By Stephen Culp

NEW YORK, Aug 16 (Reuters) - U.S. stocks edged higher on

Friday, extending their biggest weekly percentage gains of the

year as worries of an economic downturn eased and investors

focused on the Jackson Hole symposium next week.

The S&P 500 and the Nasdaq were poised to notch their

seventh straight session of gains, as stocks recouped losses

from a tailspin two weeks ago, which was brought on by weak

economic data and heightened fears of recession and confirmed

the Nasdaq had entered correction territory.

All three indexes are on course for their biggest weekly

percentage gains since October, with the S&P 500 and the Nasdaq

on track for their first weekly gain in five.

"It has been a great week, and it has been a great year.

There's been some volatility, but major indices are all up

nicely," said Oliver Pursche, senior vice president at

Wealthspire Advisors in New York.

"What we saw a couple weeks ago was the market blowing off

some steam."

A barrage of high profile economic data this week, including

the Labor Department's consumer price index and a retail sales

report from the Commerce Department, provided assurances that

inflation continues meandering down toward the Fed's goal, and

American consumer is alive and well.

Data on Friday showed U.S. single-family housing starts

dropped to a near 1-1/2-year low in July, while the University

of Michigan's preliminary take on August consumer sentiment

showed stronger-than-expected improvement.

"Economic news continues to be decent and some of the data

that has come out his week has fueled the rally, suggesting

fears of an imminent recession are overblown," Pursche said.

"Inflation continues to come down and the probability of the Fed

lowering rates by 25 basis point in September are now pretty

high."

Global central bank officials will speak at the symposium in

Jackson Hole, Wyoming, next week, with Federal Reserve Chair

Jerome Powell's keynote speech on Friday potentially setting

expectations for a U.S. rate cut trajectory.

Chicago Fed chief Austan Goolsbee said in an interview with

National Public Radio that central bank officials should be wary

of maintaining restrictive policy longer than necessary.

Financial markets are betting on a 74.5% likelihood that the

Fed will cut its key policy rate by 25 basis points as it ends

its September policy meeting, with a diminishing 25.5%

possibility of a super-sized 50-basis-point cut, CME's FedWatch

tool showed.

As of 2:04 p.m. ET, the Dow Jones Industrial Average

rose 108.6 points, or 0.27%, to 40,671.66, the S&P 500

gained 11.85 points, or 0.21%, at 5,555.07 and the Nasdaq

Composite added 44.71 points, or 0.25%, at 17,639.21.

Among the 11 major sectors of the S&P 500, financials

enjoyed the biggest percentage gain, while real estate

was down the most.

Applied Materials ( AMAT ) slid 1.7%, reversing its surge

after the chip-making equipment firm forecast

stronger-than-expected fourth-quarter revenue.

Amcor ( AMCCF ) posted a bigger-than-anticipated decline in

fourth-quarter sales. The packaging company's U.S.-listed shares

dropped 4.9% in the wake of the report.

Advancing issues outnumbered decliners on the NYSE by a

2.04-to-1 ratio; on Nasdaq, a 1.53-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and no new lows; the

Nasdaq Composite recorded 57 new highs and 73 new lows.