NEW YORK (Reuters) - U.S. stocks jumped on Monday after a raised buyout offer for Bear Stearns Cos Inc BSC.N suggested that financial stocks may have reached bottom, especially in light of fresh data that fueled hopes for a turnaround in housing.
Stocks rang up big gains for a second straight session after JPMorgan Chase & Co (JPM.N) lifted its offer for Bear Stearns to $10 a share from $2, helping alleviate concerns that other investment banking shares could tumble.
JPMorgan’s move also relieved worry that a prolonged fight with disgruntled shareholders could have derailed the deal.
Financial stocks also got a boost from an article in the Barron’s newspaper suggesting that downtrodden bank stocks could rebound by 10 percent to 20 percent by year end. Bear Stearns shares, which at their session high were more than doubled their Thursday’s closing price, ended up 76.1 percent.
Citigroup (C.N), the largest U.S. bank by assets, was among financial sector standouts in the S&P 500, with its shares up 3.5 percent, while shares of American Express Co (AXP.N), a credit card and travel services company, led the Dow’s financials with a 3.1 percent gain.
A surprising increase in sales of pre-owned homes last month fueled optimism that the worst of the housing slump may have passed. That ignited a rally in home building shares.
“More write-downs are expected in the financial space, but people are starting to see a light at the end of the tunnel and they suspect that it’s not an oncoming train,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. “At $2 a share for Bear Stearns, the question was: ‘What were the rest of the financials worth?’”
Just before the close, investors also got some more encouraging news when the U.S. Justice Department approved the proposed $4.22 billion purchase of XM Satellite Radio XMSR.O by rival Sirius Satellite Radio (SIRI.O). The deal still needs approval from the Federal Communications Commission, which is expected to follow the Justice Department’s lead.
The Dow Jones industrial average .DJI climbed 187.32 points, or 1.52 percent, to finish at 12,548.64. The Standard & Poor's 500 Index .SPX ended up 20.37 points, or 1.53 percent, at 1,349.88. The Nasdaq Composite Index .IXIC shot up 68.64 points, or 3.04 percent, to close at 2,326.75.
Monday’s gains, coming after a three-day Easter weekend, helped Wall Street notch its first back-to-back advance for March and its biggest 2-day jump in almost 4 months.
The S&P 500 achieved its highest close for the month, and with this advance, the benchmark index trimmed its drop from its October record closing high to a decline of 13.1 percent.
The Nasdaq capped its biggest two-day advance since March 2003.
A rally in the shares of the tech sector’s four horsemen — Apple Inc (AAPL.O), Research In Motion Inc RIMM.ORIM.TO, Google Inc (GOOG.O) and Amazon.com Inc (AMZN.O) — also helped carry the Nasdaq to its highest level for March so far.
Technology shares’ advance was driven in part by brokers’ positive comments on semiconductor companies.
Bear Stearns shares rose to $11.25 on the New York Stock Exchange, where they hit a session high of $13.80 — more than double their closing price of $6.39 on Thursday, before the Easter break. Those of Citigroup finished at $23.29. Shares of American Express climbed to $47.41.
Those of JPMorgan, the No. 3 U.S. bank by assets, ended up 1.3 percent at $46.55 on the NYSE.
Home builders rallied after a report from the National Association of Realtors showed a surprising jump in the February pace of existing home sales in the United States. The Dow Jones home builder index .DJUSHB shot up 5.3 percent.
Shares of Toll Brothers (TOL.N), a luxury home builder, gained 4.7 percent to close at $24.18.
Retailers also surged after upscale jeweler Tiffany & Co (TIF.N) posted an unexpectedly high quarterly profit and forecast robust growth in markets outside the United States and Japan. The S&P retail index .RLX was up 3.6 percent.
Tiffany shares jumped 10.5 percent to $42.65 on the NYSE.
Lehman raised its rating on Analog Devices Inc ADI.N, whose stock jumped 4 percent to $29.47. Lehman also increased its recommendations on Fairchild Semiconductor International FCS.N, Intersil Corp ISIL.O and Microsemi Corp MSCC.O to “overweight” from “equal weight.”
Fairchild shares shot up 6.4 percent to $11.83 on the NYSE, while on the Nasdaq, Intersil climbed 4.4 percent to $26.49 and Microsemi advanced 3.4 percent to $23.66.
Shares of Apple Inc (AAPL.O), maker of the iPod, climbed 4.7 percent to $139.53. The stock was the Nasdaq’s top gainer.
Web search company Google’s shares closed up 6.2 percent at $460.56, while BlackBerry maker RIM’s tock gained 6.6 percent to $111.83 in Nasdaq trading. Web retailer Amazon.com shares rose 3.8 percent at $75.95.
Trading was extremely light on the New York Stock Exchange, with about 1.57 billion shares changing hands, well below last year’s estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.32 billion shares traded, above last year’s daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 4 to 1 and on the Nasdaq, by almost 3 to 1.
Editing by Jan Paschal