(Updates to mid-afternoon, changes byline)
By Justin Grant
NEW YORK, March 20 (Reuters) - U.S. stocks rose on Thursday
as falling gold and oil prices calmed inflation fears, while
major mortgage financiers Fannie Mae and Freddie Mac surged for
a third day on hopes they will stabilize the housing market.
Fears about rising inflation cooled as commodity prices
fell across the board. Metal and oil investors retreated into
cash, taking profits after a series of record peaks this year.
Prior to this week, investors had piled into gold, which
emerged as a safe-haven after U.S. stocks slumped due to
recession fears and the global credit crisis, sending the price
of the metal briefly above $1,000 an ounce for the first time.
The Dow Jones industrial average <> climbed 166.97
points, or 1.38 percent, at 12,266.63. The Standard & Poor's
500 Index <.SPX> gained 17.79 points, or 1.37 percent, to
1,316.21. The Nasdaq Composite Index <> was up 26.76
points, or 1.21 percent, at 2,236.72.
Fannie Mae <FNM.N> and Freddie Mac <FRE.N> soared after
Keefe, Bruyette & Woods upgraded them, saying a decision by
federal regulators to immediately reduce the amount of excess
capital they need to hold should let the government-sponsored
enterprises support liquidity in the mortgage market.
"Value investors are starting to see the Fed ... has
successfully made the statement that whatever disaster might
pop up, they're stepping in to liquefy the situation," said
Michael Williams, chief investment strategist at Tocqueville
Asset Management in New York. "This inflation-hawk kind of talk
has been way overdone. The little guy panicked out of stocks."
On Tuesday, the S&P 500 made its biggest one-day jump in
more than five years after the Federal Reserve cut short-term
U.S. interest rates by three quarters of a percentage point.
Earlier it launched a lending facility that allows investment
banks to borrow money directly from the U.S. central bank.
Freddie Mac was trading up 8.8 percent to $32.52, while
Fannie Mae was up 11.5 percent to $34.25.
The S&P's index of financial shares <.GSPF> surged 4.5
percent.
Adding to the positive sentiment, Merrill Lynch & Co
upgraded economic bellwether General Electric Co <GE.N>, saying
the conglomerate's defensive positioning at a time when the
economy is slowing will lead the stock to outperform. GE shares
rose 5.1 percent to $37.42.
Crude oil <CLc1>, which sagged below $99 earlier, was down
$1.90 to $100.64 a barrel, alleviating worries about the effect
of high prices on consumers and businesses. Shares of retailer
Wal-Mart Stores Inc <WMT.N> rose 4.4 percent to $53.03.
Stocks had rallied early in the day after a survey from the
Philadelphia Federal Reserve Bank showed factory activity in
the U.S. Mid-Atlantic region shrinking for the fourth
consecutive month in March, but by slightly less than the
median forecast. For more see [].
Helping the Nasdaq were shares of Intel Corp <INTC.O>, up
2.9 percent to $21.69 after the chip maker raised its quarterly
dividend by about 10 percent.
Shares of Nike Inc <NKE.N> jumped 6.3 percent to $65.75 as
the company posted a third-quarter profit that handily beat
estimates. [].
Markets will be closed for Good Friday and the U.S. bond
market closed early on Thursday.
(Editing by James Dalgleish)
