U.S. Stocks Leap As Triple-A Ratings Affirmed On MBIA, Ambac

NEW YORK (MarketWatch) -- U.S. stocks rallied Monday afternoon as investors found relief after Standard & Poor's affirmed its triple-A ratings for MBIA Inc. and Ambac Financial Group Inc., easing worries about the troubled bond insurers.

"It was taking MBIA and Ambac off credit watch by S&P -- both names rallied and are taking the whole market with them," said Art Hogan, chief market strategist at Jefferies & Co.

"The headlines appear to be more bullish than the negative underlying message," said analysts at Action Economics.

After rising more than 100 points earlier on, and detouring into negative territory, the Dow Jones Industrial Average shot up 170 points after word hit that Standard & Poor's had affirmed the AAA rating of Ambac Financial's bond insurance business and took the AAA rating of MBIA's bond insurer unit off its CreditWatch.

Shares of MBIA were up 16.2%; Ambac rose 10.6%.

The Dow was more recently up 118.77 points at 12,499.79, with 24 of its 30 components posting gains, led by the likes of Home Depot Inc. , up 2%.

Energy stocks were also among those on the rise, with sector leader and Dow component Exxon Mobil Corp. advancing nearly 1.9%. .

Blue-chip laggards included financial stocks, with Citigroup Inc. off 3.2%, J.P. Morgan Chase down 2.1% and American Express Co. down 2%.

The S&P 500 gained 10.74 points to 1,363.85, and the Nasdaq Composite climbed 12.21 points to 2,316.16.

Volume on the New York Stock Exchange topped 1 billion, and advancers outran declining stocks more than 2 to 1. On the Nasdaq, 755 million shares exchanged hands, and advancing stocks edged ahead of those declining 3 to 2.

In commodities trading, crude for April delivery was recently up 4 cents to $99.27 a barrel. .

Gold for April delivery gained $2.00 an ounce to $942.50 an ounce on the New York Mercantile Exchange. .

In currencies trading, the dollar got a boost against major rivals, with the index that measures the greenback against a basket of six major currencies at 75.516, up from 75.480 earlier Monday and 75.514 in Friday's late U.S. trading. .

Taking stock

Hopes for a bailout for embattled bond insurer Ambac had fueled pre-open gains in stock futures trade.

The market saw "a slow fade from a big pop based on what was happening with Ambac, but that doesn't take away from all the issues still going on: higher energy prices and the slowing economy are still in the background," said Nolte.

In signs of life on the mergers-and-acquisition front, Getty Images Inc. has agreed to be acquired by private-equity firm Hellman & Friedman LLC for $34 a share in cash, or about $2.4 billion.

Shares of Getty jumped 30%.

Sectors on the advance included technology, bolstered by a $2 billion unsolicited bid by Electronics Arts Inc. to acquire Take-Two Interactive Software Inc. -- its second offer in recent weeks.

On Monday, shares of Electronic Arts fell 5.9% and those of Take-Two, which again rebuffed the offer, soared, up 54.6%.

Adding to the financial sector's woes were a round of downgrades, with Oppenheimer & Co. analysts slashing Citigroup's outlook and Goldman Sachs lowering its expectations for mortgage giants Fannie Mae and Freddie Mac .

Shares of Fannie Mae fell 1.7%, while Freddie Mac was off 3.8%.

In another downgrade, Goldman Sachs cut its rating on mid-cap banks to cautious, citing concerns over construction losses and the Fed rate-cut impact on floating loans.

Home-improvement chain Lowe's Cos. reported a 33% drop in its quarterly profit, citing "challenging" conditions. Its stock was recently up 2.8%.

Biotech giant Genentech Inc. shares climbed 8.5% after it said Friday the Food and Drug Administration had approved its oncology drug Avastin to treat breast cancer. .

Visa said it could raise nearly $19 billion in an initial public offering, addig it was ahead of MasterCard and American Express in terms of dollar volume and transactions in 2006.

Stock indexes, up and down earlier on, struck definitive gains after the National Association of Realtors reported sales of existing homes fell 0.4% in January, with the drop a bit less severe than expected. The report, however, illustrated an increase in the inventory of homes for sale. .

"We all know that real estate is mired in recession and it's probably going to stay there for awhile, but other sectors are not, and I think that's what the market is going to focus on," said Peter Cardillo, chief market economist at Avalon Partners. .

European shares rallied as financials made strong gains on deal talk and hopes of a bailout of Ambac. .

Asian markets also gained, led by banking shares. .

The recent volatility in the stock market is likely to continue, with 150-point swings in the Dow likely, said Paul Nolte, director of investments at Hindsdale Associates.

"We've seen credit spreads widen out in the last few weeks; as long as they continue to widen, markets are still at risk because it indicates people are not interested in taking risk," said Nolte.

By Kate Gibson