NEW YORK, Nov 28, 2007 (AP) -- Wall Street surged higher in early trading Wednesday, driving the Dow Jones industrials up more than 180 points after a top Federal Reserve official hinted that the central bank may lower interest rates again.

The market was elated after Fed Vice Chairman Donald Kohn told the Council on Foreign Relations that recent financial turbulence has reversed some of the improvement seen in markets in previous weeks, and could squeeze credit for households and businesses. He said tight financial conditions may merit "offsetting" policy from the central bank.

For investors, the possibility for lower rates seemed more compelling than persistent concerns about economic growth. The Fed will hold its last rate-setting meeting on Dec. 11.

"Everything we're seeing in the market is revolving about credit and encouragement that the Fed is going to bail us out again," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. "Investors are kind of ignoring the economic news like housing and durable orders that were all weaker than expected."

Indeed, hope for a rate cut helped offset a report that sales of existing homes fell for the eighth consecutive month in October. The National Association of Realtors reported sales of existing single-family homes and condominiums dropped by 1.2 percent last month to a seasonally adjusted annual rate of 4.97 million units.

The Commerce Department reported orders for big-ticket manufactured goods fell 0.4 percent in October _ the third straight month of decline and a weaker reading than the market expected.

The Dow rose 179.82, or 1.39 percent, to 13,138.26, adding to the blue-chip index's 215-point gain on Tuesday.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 21.76, or 1.52 percent, to 1,449.99, and the Nasdaq composite index gained 46.44, or 1.80 percent, to 2,627.24.

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