* Fannie and Freddie shares jump on rescue plan optimism
* Oil drops $4 on large builds in gasoline stocks
* Dow up 0.3 pct, S&P 500 up 0.4 pct, Nasdaq up 0.9 pct
(Updates to close)
By Kristina Cooke
NEW YORK, July 23 (Reuters) - U.S. stocks rose on Wednesday
as financial shares climbed on hopes lawmakers will approve a
rescue plan for mortgage finance companies Fannie Mae <FNM.N>
and Freddie Mac <FRE.N> and as the price of oil fell.
Financial shares rose after President George W. Bush
dropped a threat to veto a housing rescue bill, clearing the
way for measures aimed at stabilizing the battered housing
market, which has been the source of huge losses for financial
companies.
Removal of the presidential veto threat spurred investors
to snap up shares of Fannie and Freddie, the top two U.S.
housing finance companies, which would receive an emergency
government lifeline under the bill.
Oil prices fell more than $4 after government data showed a
big increase in U.S. inventories of gasoline, boosting
companies sensitive to higher fuel costs, such as retailers and
airlines.
"We're getting some positive spin from the lower oil price
and also from the comments from the legislature on Fannie and
Freddie," said Paul Nolte, director of investments at Hinsdale
Associates, in Hinsdale, Illinois.
"And while earnings in general have been poor, investors
are still welcoming these results. It's the analogy that if I
was expecting you'd get a 'D' in math and you got a 'C,' I'd be
pleased -- even though it's still only a 'C'."
The Dow Jones industrial average <> rose 29.88 points,
or 0.26 percent, to 11,632.38, while the Standard & Poor's 500
Index <.SPX> gained 5.11 points, or 0.40 percent, to 1,282.11,
a three-week closing high. The Nasdaq Composite Index <>
was up 21.92 points, or 0.95 percent, at 2,325.88.
U.S. crude oil for September delivery fell $3.94 to $124.48
a barrel. While the drop in crude boosted the broader market,
shares of major oil companies, such as Exxon Mobil <XOM.N>,
fell. Exxon shares shed 2.3 percent to $80.99 and were the top
drag on the S&P 500.
Robust results from Dow component AT&T <T.N> that showed
stronger-than-expected wireless growth helped boost technology
shares. Apple Inc <AAPL.O> led the Nasdaq higher after AT&T,
the exclusive U.S. network carrier for the iPhone, said the
launch of the iPhone 3G was strong.
But earnings reports painted a mixed picture. A drop in the
shares of Boeing Co <BA.N>, another Dow component, kept gains
in check on the blue chip index after the planemaker reported a
bigger-than-expected drop in profit.
Boeing fell 3.7 percent to $66.72.
Industrial conglomerate Caterpillar <CAT.N> fell 3.4
percent to $72.42 after JPMorgan downgraded the company, citing
the possibility that volumes may slow further in North America
and Europe.
Financial shares rose, with the S&P financials sub-index
<.GSPF> up 1.8 percent. Shares of Freddie Mac jumped 11.3
percent to $10.80, while Fannie Mae climbed 11.9 percent to
$15.
Home builders also headed higher on optimism about the
housing bill, pushing the Dow Jones home construction index
<.DJUSHB> up 3.5 percent. Shares of luxury home builder Toll
Brothers <TOL.N> rose 3.4 percent to $21.08.
Nolte and other analysts noted that given the Securities
and Exchange Commission's clampdown on certain types of short
selling in financial companies, some hedge funds were reversing
the popular long-oil/short financials trade, heightening gains
in financial stocks and the decline in oil.
Shares of AT&T <T.N>, the largest U.S. telecommunications
company, jumped 3.9 percent to $33.06.
On the economic front, Federal Reserve said in its Beige
Book that the pace of economic activity slowed somewhat through
mid-July.
Trading was moderate on the New York Stock Exchange, with
about 1.7 billion shares changing hands, below last year's
estimated daily average of roughly 1.9 billion, while on
Nasdaq, about 2.69 billion shares traded, above last year's
daily average of 2.17 billion.
Advancing stocks outnumbered declining ones by 5 to 3 on
the NYSE and by 4 to 3 on the Nasdaq.
(Editing by Leslie Adler)
