Stocks jump after relief on bond insurers

NEW YORK (Reuters) - U.S. stocks rose more than 1 percent on Monday on signs the two largest bond insurers would stabilize, bringing a wave of relief to a market dogged by concerns of further bank write-downs.

Energy shares also surged, helping to pull the Dow higher, after oil approached $100 per barrel partly on speculation that OPEC may cut supply at a meeting next week.

News of two media-related merger deals inspired optimism about share valuations. Electronic Arts Inc (ERTS.O) offered $1.9 billion for its smaller video game rival, Take-Two Interactive Software (TTWO.O), while digital image provider Getty Images Inc GYI.N agreed to be bought by a private equity firm for $2.4 billion.

Financial shares recovered from sharp early losses after Standard & Poor's removed its threat to downgrade MBIA (MBI.N) Inc's "AAA" rating. MBIA jumped 19.7 percent while rival Ambac Financial Group Inc (ABK.N), which is said to be near a deal to shore up its financial position, shot up 15.9 percent.

"We're robustly higher across a broad spectrum. Keeping the 'AAA' ratings, coupled with the Ambac news, was massively important for the market," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

The market has been hit by concerns about a ratings downgrade of the bond insurers. Some big banks are exposed to the credit ratings the bond insurers give to the debt the banks hold.

The Dow Jones industrial average .DJI surged 189.20 points, or 1.53 percent, to 12,570.22. The Standard & Poor's 500 Index .SPX gained 18.69 points, or 1.38 percent, to 1,371.80. The Nasdaq Composite Index .IXIC rose 24.13 points, or 1.05 percent, to 2,327.48.

Late on Friday, Ambac lifted the stock market on talk that the rescue plan would be announced soon. On Monday, Dresdner Bank said it intends to support a rescue package for Ambac.

Shares of MBIA jumped $2.40 to end at $14.58 while Ambac gained $1.70 to close at $12.41, both on the New York Stock Exchange.

An S&P index of energy shares .GSPE climbed 2.5

percent, while shares of Exxon Mobil Corp (XOM.N) gained 2.3 percent to $89.13.

In the tech sector, Take-Two shares jumped 54.9 percent to $26.89, while shares of Electronic Arts fell 5.2 percent to $47.14. Both trade on the Nasdaq.

Getty shares shot up 29.5 percent to close at $31.67 on the New York Stock Exchange.

The bond insurer news offset renewed concerns about subprime-related losses at the biggest U.S. banks.

Early in the session, investors unloaded shares of banks like Citigroup Inc (C.N) following a report from Goldman Sachs that it expects several more multibillion-dollar write-downs across the sector. A potential $12 billion loss at Citi topped the list.

Goldman also sees more write-downs from JPMorgan Chase & Co (JPM.N), Merrill Lynch & Co Inc MER.N and Morgan Stanley (MS.N). Meanwhile, Oppenheimer cut its earnings outlook on a handful of banks.

Citigroup shares slid 1.5 percent to $24.74, but JPMorgan stock gained 0.2 percent to $44.03 and Merrill Lynch advanced2.6 percent to $54.42.

A report early in the day showed a decline in January sales of existing homes was less than the market expected, but it showed an increase in the inventory of homes for sale.

Trading was moderate on the New York Stock Exchange, with about 1.5 billion shares changing hands, below last year's estimated daily average of roughly 1.9 billion, while on Nasdaq, about 2.2 billion shares traded, about even with last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining stocks on the NYSE by a ratio of about 3 to 1 and by about 2 to 1 on the Nasdaq.

(Editing by Jan Paschal)