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Wall Street moves higher as investors hope housing slump might be nearing bottom

Wall Street moves higher as investors hope housing slump might be nearing bottom

Wall Street advanced Monday on hopes that the worst housing slump in a quarter century might be nearing a bottom, a trend that could be the catalyst needed to revive the badly beaten financial sector.
Investors, while still wary of recession, grew hopeful after the National Association of Realtors reported existing homes fell less than forecast. Some experts interpreted this as a housing market on the verge of bottoming out with a rebound expected to start toward the end of this year.
Wall Street also found encouragement after Visa said it still planned to go ahead with a $19 billion (euro12.82 billion) initial public offering this year that could go down as the biggest in U.S. history. Further, investors remained hopeful that troubled bond insurer Ambac Financial Group Inc. would receive a cash injection to help preserve its coveted "AAA" rating.
"The home sales, even though they were weak, showed some signs of stabilization _ and even the smallest bit of positive news and the market takes off," said Chris Johnson, president of Johnson Research Group. "People will get very excited if they sense a bottom in the financials because they've been the Achilles' heel of this market."
However, he warned that the rise in major indexes could "turn on its nose" as investors remain skittish. The market this year has been prone to quick swings as investors buy on dips and then quickly cash out.
In midday trading, the Dow rose 31.75, or 0.26 percent, to 12,412.77. The blue chip index had been up more than 100 points earlier in the session.
Broader stock indexes also held on to gains. The Standard & Poor's 500 index added 1.08, or 0.08 percent, to 1,354.19; and the Nasdaq composite index rose 3.18, or 0.14 percent, to 2,306.53.
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 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 3.86 percent from 3.80 percent late Friday. The dollar was higher against most major currencies, while gold prices fell.
In corporate news, Ambac rose 5 cents to $10.78 on optimism about a possible rescue plan. Dresdner Bank said Monday it intends to support such a package that would shore up the bond insurer's balance sheet.
"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 use these insurers to back bonds, allowing them to obtain higher ratings and cheaper financing.
Visa said in a Securities and Exchange Commission filing it will offer 406 million shares at $37 to $42 per share. The IPO was seen as a positive sign that a major financial company feels confident to go public despite the ongoing market turbulence.
TakeTwo Interactive Software Inc. surged $9, or 52 percent, to $26.37 after rival Electronic Arts Inc. renewed its bid to buy the company. The stock is now trading at a 52-week high on speculation the bid could go hostile.
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 $6.70, or 9.4 percent, to $78.30.
Lowe's Cos. reported a drop in fourth quarter earnings and cited the weak housing market. However, shares of the home improvement retailer rose $1.04, or 4.4 percent, to $24.63 amid hopes that the housing slump might soon hit a bottom.