(Refiles to fix typo in headline)
(Updates to late morning)
By Ellis Mnyandu
NEW YORK, Feb 27 (Reuters) - U.S. stocks rose on Wednesday
after Fannie Mae <FNM.N> and Freddie Mac <FRE.N> got the green
light to invest more money in the mortgage market, sparking an
advance in financial company shares broadly.
The decision by federal regulators could provide
much-needed cash to stabilize the battered U.S. housing
market.
Citigroup Inc <C.N> led advancers on the S&P 500 with a
gain of about 2 percent, while American Express Co <AXP.N> led
Dow financials, with a jump of about 1 percent.
The lifting of investment caps will free up financing for
the mortgage finance companies to invest in the U.S. housing
market, a step that could help ease the drag of the housing
downturn on the economy.
Fannie Mae shares rose 12 percent, while Freddie Mac
climbed 10 percent.
"The news is obviously very good for the market, as it
means more people can invest in Fannie and Freddie," said
Edward Craig, head of U.S. cash equities trading at Jefferies
in New York.
The Dow Jones industrial average <> was up 35.74
points, or 0.28 percent, at 12,720.66. The Standard & Poor's
500 Index <.SPX> was up 2.22 points, or 0.16 percent, at
1,383.51. The Nasdaq Composite Index <> was up 8.59
points, or 0.37 percent, at 2,353.58.
Stocks had wavered earlier as investors fretted about the
economy's outlook following weaker-than-expected January data
on new home sales and orders of long-lasting manufactured
goods.
On Capitol Hill Federal Reserve Chairman Ben Bernanke told
lawmakers that downside risk still dogged the U.S. economy
despite a series of interest-rate cuts.
The U.S. central bank, however, will act in a timely manner
to support growth and provide insurance against downside risks,
he told the House Financial Services Committee in the Fed's
semiannual monetary report to Congress.
Shares of Fannie Mae, which before the market open posted a
larger-than-expected $3.6 billion quarterly loss, climbed to
$30.41 on the New York Stock Exchange, and Freddie Mac shares
rose to $27.88.
Citigroup shares climbed to $25.44 and American Express, a
credit card and travel services company, rose to $46.40.
A slide in the dollar also underpinned the market as shares
of exporting companies, including Caterpillar Inc <CAT.N>
bounded higher. Shares of the heavy-equipment maker advanced
2.1 percent to $74.87. Shares of beverage company Coca-Cola Co
<KO.N> climbed 1.04 percent to $60.14.
Shares of home builders were another standout, with Toll
Brothers <TOL.N> up more than 4 percent at $24.20 on the NYSE.
Before the open, the largest U.S. luxury home builder had
posted a quarterly loss.
The Dow Jones home construction index <.DJUSHB> was up 3.8
percent.
On the Nasdaq, shares of Apple Inc <AAPL.O>, the maker of
the iPhone and the iPod, rose 1.1 percent to $120.57, and those
of BlackBerry devices maker Research In Motion Ltd <RIMM.O>
<RIM.TO> gained 2.7 percent to $110.73.
The euro rose above $1.51 on Wednesday for the first time
in its nine-year history.
The Office of Federal Housing Enterprise Oversight said it
would lift an investment cap for Fannie Mae and Freddie Mac
that will give them more flexibility to invest in the battered
U.S. housing market.
(Additional reporting by Kristina Cooke, Editing by Kenneth
Barry)
