U.S. Stocks End Higher For Second Day On Mortgage Hopes

NEW YORK (MarketWatch) -- U.S. stocks turned solidly higher in another roller-coaster ride of a day on Wednesday, after data showing a large surge in mortgage refinancings bolstered shares of financial and consumer discretionary companies.

Investors also saw a late-session boost after the Wall Street Journal reported that the Treasury is considering a plan that would lower mortgage rates, possibly bringing newly issued loans to as low as 4.5%.

"A further push on housing could arrive in January when President-elect Obama is inaugurated," said Tony Crescenzi, bond market strategist, Miller Tabak & Co. "It is possible that Obama's fiscal stimulus plan will include incentives for the purchase of new homes."

After triple-digit moves in either direction, the Dow Jones Industrial Average bolted to new highs in the final 20 minutes of trading, finishing at 8,591.69, up 172.6 points, or 2.1%.

Shares of Citigroup Inc. led blue-chip gains, rising 8.3%. Bank of America Corp. added 7.1% and J.P. Morgan Chase advanced 6%.

Alcoa Inc. was the Dow's biggest laggard, off 4.8%.

The S&P 500 climbed 21.93 points, or 2.6%, to 870.74, with financials, consumer discretionary and information technology leading sector gains among the S&P's 10 industry groups.

The Nasdaq Composite advanced 42.58 points, or 2.9%, to 1,492.38.

Shares of Marvell Technology Group Ltd. gained 20.4% after the chipmaker posted quarterly results that beat Wall Street projections.

Volume on the New York Stock Exchange topped 1.5 billion, and advancers pulled ahead of decliners 2 to 1. On the Nasdaq, 1 billion shares were exchanged, and advancers outdid decliners 8 to 5.

Research In Motion Ltd. cut its forecast, with the BlackBerry maker slashing its earnings and revenue targets for its fiscal third quarter one day after rival Palm Inc. issued a similar outlook. .

Thornburg Mortgage Inc. said trading of its shares has been suspended on the New York Stock Exchange because of a price drop below the $1 minimum.

Rush to lock in rates

The Mortgage Bankers Association's weekly survey found mortgage applications rose sharply last week as borrowers rushed to lock in lower rates. .

The ADP national employment index found the U.S. private sector shed 250,000 jobs in November, the biggest such loss in seven years. .

"These data will help further prepare the financial markets for the possibility of a weak jobs report on Friday," said Crescenzi.

"The ADP report has underestimated job losses every single month so far this year," said Jack Ablin, chief investment officer, Harris Private Bank, of the turn into positive territory.

In other data, the Labor Department said the productivity of U.S. workers was slightly stronger in the third quarter than previously reported.

And the Institute for Supply Management said nonmanufacturing sectors of the U.S. economy contracted at a record pace in November.

"Both households and businesses are deleveraging rapidly, just as banks have done over the past year, and the pull-back is sharply impacting spending and output as gauged by the sentiment indicators," said analysts at Action Economics of the ISM index, which fell to 37.3 in November.

Another grim reading of the American economy came from the Federal Reserve, which released the findings of its 12-region survey Wednesday afternoon. .

Oil futures tilted lower, with crude for January falling 0.4% to close at $46.79 a barrel on the New York Mercantile Exchange. .

Gold futures fell, with the dollar's rise curbing investor appetite for the precious metal. Gold for February delivery declined $12.8 to $770.5 an ounce on the Nymex. .

Treasurys were higher, with 10-year note yields off 2 basis points at 2.66%. .

The dollar gained ground against the euro and the British pound, with the dollar index at 86.73, up from 86.555 in NorthAmerican activity late Tuesday. .

Overseas, Asian stocks ended mostly higher as investors cheered the latest round of rate cuts by central banks. .

In Europe, shares fell amid further signs of economic contraction. .

By Kate Gibson