Stocks rose modestly Monday as investors remained hopeful that ailing bond insurer Ambac Financial Group Inc. would receive a capital injection that would save its credit rating.
There has been speculation that Ambac might find sufficient capital early this week to hold onto the stellar "AAA" rating it needs to remain in the municipal bond business. However, there was no confirmation that this was the case and the uncertainty began to gnaw at investors.
"Everyone is waiting to see how the Ambac matter comes out," said Peter Cardillo, chief market economist at Avalon Partners. "The fact that this is not a done deal is keeping the market a little on the defensive side."
The credit industry, already slammed by the summer's mortgage crisis, could face further erosion if bond insurers were to falter. Municipalities and companies used these insurers to back bonds, allowing them to get higher rating and cheaper financing.
The Dow Jones industrial average rose 35.65, or 0.29 percent, to 12,416.67.
Broader stock indexes were also higher. The Standard & Poor's 500 index added 0.74, or 0.05 percent, to 1,353.85; and the Nasdaq composite index rose 5.40, or 0.23 percent, to 2,308.75.
Despite continuing volatility, the stock market has traded in a range this month as investors hedge their bets as to whether troubled credit markets and the overall economy have stabilized.
Last week, the Dow inched up 0.27 percent, the S&P 500 index rose a modest 0.23 percent and the Nasdaq composite index dipped 0.79 percent. But the three indexes are all down sharply since the start of 2008.
Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.81 percent from 3.80 percent late Tuesday. The dollar was higher against most major currencies, while gold prices fell.
Oil prices hovered near $100 a barrel with supply concerns heightened by a Turkish military incursion into northern Iraq and warnings by Iran against further international sanctions. A barrel of light, sweet crude fell 70 cents at $98.11 on the New York Mercantile Exchange.
In corporate news, Visa said it could raise almost $19 billion (euro12.82 billion) from an initial public offering, which would easily become the largest IPO in U.S. history. San Francisco-based Visa Inc. said in a Securities and Exchange Commission filing it will offer 406 million shares at $37 to $42 per share.
TakeTwo Interactive Software Inc. surged $8.42, or 48.5 percent, to $25.79 after rival Electronic Arts Inc. renewed its bid to buy the company.
There was good news for cancer drug manufacturer Genentech Inc. The Food and Drug Administration granted an accelerated approval for its Avastin treatment, which is administered with a chemotherapy treatment to breast cancer patients.
Shares rose $7.16, or 11 percent, to $78.76.
Lowe's Cos. reported a drop in fourth quarter earnings and cited the weak housing market. However, shares of the home improvement retailer rose 15 to $23.74 amid hopes that the housing slump might soon hit a bottom.
Sales of existing homes fell to the lowest level in nearly a decade in January while the median price for a home dropped for the fifth straight month, according to the National Association of Realtors.
The trade group reported Monday that sales of single-family homes and condominiums dropped by .04 percent last month to a seasonally adjusted annual rate of 4.89 million units _ the slowest sales pace on record going back to 1999.
The median price of a home sold in January slid to $201,100 (euro135,722), a drop of 4.6 percent from a year ago. It was the fifth straight monthly price decline and underscored the continued pressure facing housing, which is struggling to emerge from its worst slump in a quarter-century.
The Russell 200 index of smaller companies rose 1.83, or 0.33 percent, to 697.26.
Advancing issues outpaced decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 186.5 million shares exchanging hands.