CORRECTION - - RPT-UPDATE 1-Fannie, Freddie shrs jump; financials rally

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NEW YORK, July 16 (Reuters) - Shares of mortgage finance companies Fannie Mae and Freddie Mac jumped on Wednesday, amid a broad financial sector rally after reassuring results from Wells Fargo (WFC.N) helped ease some of Wall Street's concerns about the impact of the credit crisis.

The two pillars of the U.S. housing market also got a boost from comments by Fannie Mae (FNM.N) chief executive Daniel Mudd late on Tuesday that the company will not need to take advantage of recent emergency measures offered by the Treasury and Federal Reserve.

The measures include a pledge to extend more credit or buy stakes in Fannie and its sibling, Freddie Mac.

Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey, said investors were comforted by Mudd's remarks.

The U.S. Securities and Exchange Commission's emergency rule to limit certain types of short selling in major financial firms, including Fannie and Freddie, also was helping lift a major negative drag on the shares, traders said. Short sellers bet a stock will fall.

"The SEC emergency ruling on limiting certain types of shorting is also helping Fannie and Freddie shares, for sure," said Sowanick.

Fannie Mae's shares rose 11.3 percent to $7.86, while Freddie Mac gained 12.7 percent to $5.93.

The Financial Select Sector SPDR fund (XLF), which tracks the performance of big-cap financial stocks, soared 5.24 percent.

Wells Fargo helped set the positive tone for financials when the fifth-largest U.S. bank reported better-than-expected quarterly results on Wednesday and raised its dividend. (Reporting by Kristina Cooke and Jennifer Ablan; Editing by Theodore d'Afflisio)