(Restores dropped words in paragraph 6)
By Cal Mankowski
NEW YORK, March 18 (Reuters) - U.S. stocks rallied on
Tuesday ahead of a decision from the Federal Reserve policy
meeting expected to conclude with an interest-rate cut of as
much as 1 percentage point.
Fannie Mae <FNM.N> and Freddie Mac <FRE.N> rose on
expectations that regulators will ease a restriction on
capital, enabling them to increase their lending to the weak
housing sector.
Stronger-than-expected earnings from Goldman Sachs Group
Inc's <GS.N> and Lehman Brothers Holdings Inc <LEH.N> also
drove the financial sector higher. .
Subodh Kumar, chief investment strategist at Subodh Kumar
& Associates in Toronto, said the market has been encouraged
by the Fed's efforts in dealing with the crisis.
"Perceptions about how involved the Fed is and how
successful it will be have changed for the better," he said.
The Federal Reserve's policy-setting committee was
expected to make its announcement on interest rates around
2:15 p.m. (1815 GMT)
The Dow Jones indus strial average <> jumped 256.53
points, or 2.14 percent, to 12,228.78 and the Standard &
Poor's 500 Index <.SPX> rose 32.23 points, or 2.60 percent, to
1,309.83. The Nasdaq Composite Index <> gained 49.37
points, or 2.27 percent, to 2,226.38.
The rebound in financial shares followed a sell-off on
Monday after JPMorgan Chase & Co's <JPM.N> deal to buy
struggling brokerage Bear Stearns <BSC.N> at a rock-bottom
price.
Shares of Fannie Mae <FNM.N> climbed 20.2 percent to
$26.70 and Freddie Mac rose 18.6 percent to $24.45.
Shares of Goldman gained 12 percent to $169.06 while
Lehman shot up 33.6 percent at $42.42.
"The numbers that came out on Goldman Sachs and Lehman,
while not great, seem to suggest that there could be light at
the end of the tunnel," said Matt Kaufler, portfolio manager
and analyst at Clover Capital Management in Rochester, New
York.
A broker dealer index <.XBD> surged 8.9 percent.
On the Nasdaq, Yahoo Inc <YHOO.O> shares rose 6.8 percent
to $27.60 after the Internet search company affirmed its
outlook for the first quarter and full year. See
[].
Interest-rate futures show investors are almost fully
pricing in a one percentage-point cut in U.S. short-term
rates, which would take the benchmark fed funds rate target
down to 2 percent.
On Sunday night, the Fed made an emergency quarter-point
cut to its discount rate to 3.25 percent and expanded lending
to include brokerages and investment banks, in the first such
move since the Great Depression of nearly 80 years ago.
Data before the opening on U.S. housing starts was
stronger than expected, adding further support to the market.
(Editing by Jan Paschal)
