Dow, S&P rise with oil, Motorola

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks rose on Tuesday as a 5.5 percent jump in oil prices to nearly $57 a barrel spurred a rally in the energy sector, while shares of Motorola Inc. gained after investor Carl Icahn said he will seek a seat on the board.

U.S. crude oil futures prices shot up nearly $3 a barrel on colder temperatures and an OPEC supply cut expected to go into effect on Thursday. Exxon Mobil Corp., up 1.6 percent, or $1.19, at $74.39, gave the biggest boost to the S&P 500 and ranked No. 2 among the Dow's advancers.

"Energy is up strong, and that's driving the whole energy patch up," said Scott Vergin, portfolio manager at Thrivent Financial in Minneapolis. "We've got the cold weather, and there's speculation over how long it will last."

But volume was below average, with some investors biding their time before Wednesday, when the Federal Reserve will make its decision on interest rates and release a statement that may shed some light on how it views the strength of the economy and the risk of inflation.

The Dow Jones industrial average rose 32.53 points, or 0.26 percent, to end at 12,523.31. The Standard & Poor's 500 Index advanced 8.20 points, or 0.58 percent, to finish at 1,428.82. The Nasdaq Composite Index gained 7.55 points, or 0.31 percent, to close at 2,448.64.

SANDISK TAKES A LATE TUMBLE

After the closing bell, shares of SanDisk Corp., a maker of flash memory cards for cellphones and digital cameras, initially rose to $43.30 in electronic trading before shifting gears and tumbling 10.4 percent to $38.38.

SanDisk reported a quarterly loss, due to the cost of acquiring Msystems Ltd., and said prices for its memory products were falling rapidly. Excluding acquisitions costs, its earnings per share beat Wall Street's expectations. The stock closed on Nasdaq at $42.83.

During the regular session, oil's sharp rebound from its slide below $50 a barrel earlier this month prompted investors to buy shares of major energy companies such as Exxon, Chevron Corp., Schlumberger Ltd. and ConocoPhillips.

Motorola, the No. 2 cellphone maker, said Icahn will seek a seat on the board after he disclosed owning a 1.4 percent stake. The billionaire investor has a reputation of pushing corporate management to improve a company's performance.

Shares of Motorola surged 6.9 percent, or $1.27, to $19.58 in the largest daily jump in six months.

STREET HOPES FOR STEADY FED

The Fed is expected on Wednesday to leave the benchmark federal funds rate at 5.25 percent, where it has been since last year. The central bank's policy-makers decided last August to pause after raising rates 17 times in two years.

The 10-year U.S. Treasury note rose 3/32 in price to 98, while its yield slipped to 4.88 percent, down 1 basis point from late on Monday.

"I think they're just going to sit tight for awhile, which I don't think is negative for the stock market. It means the economy is still OK, rates are still relatively low and corporate profits will still be OK, and that's good for the market," Vergin said.