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Doubts about high U.S. unemployment, the risk of a European financial crisis, climbing inventories and sluggish PC sales had clouded the second-half outlook for Intel and other chip makers like Advanced Micro Devices.

But the company, which dominates the PC microchip industry but is struggling in a fast-expanding mobile market, forecast current-quarter revenue of about $14 billion, give or take $500 million.

"When we look across the broader worldwide supply chain for PCs and servers, what we see are inventory levels that are lean out there. People are managing things lean, they're prudent," Intel Chief Financial Officer Stacy Smith told Reuters.

Investors eyeing slow economies and red-hot sales of Apple's iPad 2 in recent months have insisted Intel's outlook for PC growth is overly optimistic. Analysts have warned that Intel at some point may be forced to trim its estimate and that sentiment weighed on Intel's shares following the report.

"The primary question investors are going to ask now is where Intel is seeing the fundamental strength in the PC market," said Evercore Partners analyst Patrick Wang. "It's hard to have any confidence in how they are going to deliver 7 percent growth sequentially."

Smith said he would give more details about Intel's expectations for PC sales during the quarterly earnings call with analysts.

Gains in the second quarter were driven by the PC group, Intel's largest segment, and the data center group, which has been expanding quickly in part because of cloud computing.

The Intel Atom division saw revenue slide 15 percent to $352 million.

Intel's upbeat results followed positive quarterly earnings from Apple Inc and International Business Machines Corp earlier this week.

Analysts on average had expected Intel's revenue to rise to $13.5 billion in the current quarter, according to Thomson Reuters I/B/E/S, less than normal growth for this time of year.

Revenue in the June quarter was $13.1 billion, up 22 percent over the year-ago period and above the $12.8 billion expected by analysts, according to Thomson Reuters I/B/E/S.

Non-GAAP net income in the quarter was $3.2 billion, up 10 percent. Non-GAAP earnings per share were 59 cents, beating expectations of 51 cents.

Shares of Intel dipped 1.52 percent to $22.64 in extended trade after closing down 0.3 percent.

(Reporting by Noel Randewich; Editing by Richard Chang)

The National Association of Realtors said on Wednesday sales fell 0.8 percent last month from May to an annual rate of 4.77 million units, the lowest since November. May's sales were unrevised at a 4.81 million-unit rate.

Economists polled by Reuters had expected sales to rise to a 4.90 million-unit pace. Compared to June 2010, sales dropped 8.8 percent.

"There is really nothing new to say about housing, the market continues to be really soft and demand is really definitely lackluster," said Sean Incremona an economist at 4CAST in New York.

"There are plenty of headwinds facing housing and this continues to suggest that we are bumping along the bottom."

Stocks were little changed on the data, while bond prices added slightly to earlier losses. The dollar remained lower versus the euro and yen.

The drop in sales was a surprising given that pending home sales contracts rose in May, but the NAR noted the cancellation rate rose to 16 percent from 4 percent in May.

This was the highest since the NAR started tracking cancellations last year and was well above the usual rate of 9 percent to 10 percent, the NAR said.

Chief economist Lawrence Yun said it was unclear why cancellations had jumped in June, but added that the weak economy could have been a factor.

The decline in sales dampened hopes that a mild improvement was underway in a sector that has been plagued by an over supply of for-sale properties and falling prices.

Data on Tuesday showed groundbreaking for homes touched a six-month high in June, partly boosted by growing demand for rental apartments.

Continued housing market weakness is helping to constrain U.S. growth and June's soft sales could add to concerns about the economy's ability to swiftly rebound this quarter after stumbling badly in the first half of the year.

Government data next week is expected to confirm the economy lost further ground in the second quarter after a pedestrian 1.9 percent annual growth pace in the January-March period.

Despite the weak sales pace and a rise in the inventory of homes on the market, prices rose. The median home price climbed 0.8 percent in June from a year earlier to $184,300.

June's sales pace pushed the supply of existing homes on the market 9.5 months' worth, the highest since November, from 9.1 months' worth in May. A supply of between six and seven months is generally considered ideal.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

Jose Manuel Barroso delivered the message as officials of the 17-nation currency area and bankers struggled to pin down a package of measures to persuade markets that Greece can be saved from default and the rest of the euro zone from contagion.

"Nobody should be under any illusion: the situation is very serious. It requires a response, otherwise the negative consequences will be felt in all corners of Europe and beyond," Barroso told a news conference.

He said the elements of a solution must include: measures to ensure the sustainability of Greek public finances, private sector involvement in funding for Athens, more flexible use of the euro zone's EFSF bailout fund, repair of the region's banking system and liquidity to keep the economy going.

In what sounded like a veiled criticism of German Chancellor Angela Merkel, Europe's reluctant paymaster, Barroso said it was time for leaders to say "what they can do and what they want to do. Not what they can't do and won't do."

Merkel lowered expectations on Tuesday, saying the summit would not bring a one-shot spectacular solution to the Greek crisis but only the latest in a series of incremental steps to tackle the roots of Athens' debt and competitiveness problems.

The euro and peripheral euro zone bonds rose on hopes that the leaders would let the EFSF buy government bonds in the secondary market and provide precautionary credit lines to countries in difficulty.

BANKS' PROPOSAL

However, EU paymaster Germany has so far blocked either course, and while a source close to the talks told Reuters earlier this week that both ideas were back on the table, there is no sign yet that Berlin has changed its mind.

Both would require changes in the EFSF's rules that would have to be ratified by national parliaments, and could fall foul of skeptics in Germany, the Netherlands and Finland.

They would also run counter to a treaty signed just three weeks ago creating a permanent crisis-resolution mechanism from 2013, the ESM, which would not have such powers.

Major European banks and insurers were to send euro zone governments a complex proposal later on Wednesday for helping in a Greek rescue, industry sources said.

One banking source said the banks were offering a mixture of debt rollovers, maturity extensions and other measures worth roughly 40 billion euros over three years, but details have yet to be finalized.

The banks are determined to fight a proposal for a tax on the financial sector to help pay for a second Greek rescue, which a euro zone working paper obtained by Reuters on Tuesday showed was seen as the least risky private sector contribution.

Banking sources said a tax would unfairly penalize banks with no exposure to Greek debt and would inevitably give rise to legal challenges.

Other mooted steps such as rolling over maturing Greek bonds, swapping existing bonds for new ones with longer maturities or buying back Greek debt in the secondary market would trigger a selective or outright default, the paper said.

"GERMAN RETICENCE"

Merkel and French President Nicolas Sarkozy, who conferred by telephone on Tuesday, were to meet in Berlin on Wednesday evening for what could be the decisive preparatory session before euro zone officials meet early on Thursday to thrash out details hours before the summit.

"We are very confident that there will be a good and sensible solution," Merkel's spokesman told reporters, stressing that private sector creditors' participation remained a key German priority.

French Foreign Minister Alain Juppe also said he was "sure we will find an accord," adding that contrary to media reports, "there is a very broad convergence of views" among euro zone capitals.

However, Paris also signaled apparent frustration at Berlin's continued opposition to common euro zone bonds, a step which European Socialist leaders and many economists argue would provide a long-term solution to the debt crisis.

French government spokeswoman Valerie Pecresse said after a cabinet meeting that "German reticence" was the main obstacle to the idea of issuing joint euro bonds.

Despite Wednesday's cautious market optimism, many analysts fear the fifth European summit this year will produce half-measures that, at most, will buy a couple of months before pressure for a Greek debt restructuring becomes acute again.

The European Central Bank kept up a drumbeat of pressure on euro zone leaders to avoid any step that could cause a selective Greek default, which the ECB has warned would force it to refuse Greek bonds as collateral for bank refinancing.

ECB chief economist Juergen Stark said in a newspaper he hoped the leaders would stick to a previous commitment to avoid a selective default, because anything else would confuse markets.

(additional reporting by Alex Chambers, Jessica Mortimer and Kirsten Donovan in London, Andreas Rinke and Stephen Brown in Berlin, Nick Vinocur in Paris; writing by Paul Taylor; editing by Janet McBride)

Blockbuster sales of the iPhone and strong Asian business again helped Apple Inc (AAPL.O) crush Wall Street's expectations, driving its shares up more than 7 percent to a record high and boosting Asian stocks. Apple shares traded in Frankfurt (AAPL.F) were up 4 percent.

Yahoo (YHOO.O) plugged some of the holes that were weakening its Internet search business in the second quarter, but revealed new challenges that hurt its display advertising business.

U.S. cleaning products giant Ecolab Inc (ECL.N) is expected to buy chemicals firm Nalco Holding Co (NLC.N) and a deal could be announced as early as Wednesday morning, a source familiar with the situation told Reuters. Wall Street Journal had earlier reported that the Ecolab-Nalco deal could be valued at about $5 billion.

Wireless telecom firm T-Mobile USA said it will begin offering unlimited data service plans, in a move aimed at wooing customers of bigger rivals Verizon Wireless and AT&T Inc (T.N) which had stopped offering such plans.

Altera Corp (ALTR.O) forecast third-quarter revenue well above estimates as the programmable chipmaker saw continuing demand from telecom operators ramping up their networks.

A top U.S. Federal Reserve official said on Thursday the U.S. economy should grow at a modest pace for the next several years, but issued a harsh criticism of the U.S. central bank's just-concluded bond buying program.

Investors awaited a raft of earnings on Wednesday, from companies such as Intel Corp (INTC.O), United Technologies Corp, American Express Co, eBay Inc (EBAY.O), Johnson Controls Inc and Abbott Laboratories.

On the macro side, U.S. home sales data is due at 1400 GMT.

U.S. stocks recorded their best day since March on Tuesday after strong corporate results and renewed hope for an agreement in Washington on thorny budget issues boosted investor confidence.

The Dow Jones industrial average .DJI was up 202.11 points, or 1.63 percent, at 12,587.27. The Standard & Poor's 500 Index .SPX was up 21.27 points, or 1.63 percent, at 1,326.71. The Nasdaq Composite Index .IXIC was up 61.41 points, or 2.22 percent, at 2,826.52.

(Reporting by Blaise Robinson; Editing by Jon Loades-Carter)