U.S. Stocks Rise on Rate-Cut Speculation, Fannie, Freddie Caps

U.S. stocks rose for a fourth day after Federal Reserve Chairman Ben S. Bernanke said policy makers will act quickly to boost growth and regulators allowed Fannie Mae and Freddie Mac to buy more mortgages.

Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, rallied and led the market's rebound after the government removed restrictions on the size of their portfolios. Citigroup Inc., American Express Co. and General Motors Corp. led gains in the Dow Jones Industrial Average, which fell earlier after orders for durable goods dropped more than forecast in January.

The Standard & Poor's 500 Index climbed 4 points, or 0.3 percent, to 1,385.29 at 11:27 a.m. in New York, capping its longest stretch of gains this year. The Dow average added 54.63 points, or 0.4 percent, to 12,739.55, rebounding from a loss of 0.6 percent. The Nasdaq Composite Index rose 13.24, or 0.6 percent, to 2,358.23. About three stocks gained for every two that fell on the New York Stock Exchange.

If liquidity is restored to the mortgage market it has a good chance of restoring liquidity to the rest of the credit markets, said Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. in New York. There's a lot of companies having a tough time accessing capital because the banks are at the center of the credit crisis.

Bernanke's comments prompted traders to increase bets on larger rate cuts. He told Congress that the Fed will act in a timely manner to insure against downside risks to the economy. Stocks fell earlier after the Commerce Department said bookings for products meant to last several years decreased 5.3 percent in January.

Fannie, Freddie

Fannie Mae rose $2.82, or 10 percent, to $29.79. Freddie Mac climbed $1.91, or 7.6 percent, to $27.12. The limits on the size of the companies' mortgage portfolios, imposed after accounting errors at the government-chartered companies, will be lifted on March 1, according to a statement sent by e-mail today from the Office of Federal Housing Enterprise Oversight.

Citigroup Inc., the biggest U.S. bank, climbed 44 cents to $25.39. Goldman Sachs Group Inc., the largest securities firm, rallied $3.55 to $176.25.

Traders boosted bets that the Fed will cut interest rates by 0.75 percentage point to 2.25 percent by the central bank's March meeting. Fed funds futures trading shows 12 percent odds of a three-quarter point cut, compared with no chance yesterday. The remaining bets are for a half-point reduction to 2.5 percent.

`Hit the Ground Running'

The Fed has really hit the ground running in 2008 trying to keep this going, but it looks as though they're pushing on a string, Peter Sorrentino, who helps manage $15 billion as senior portfolio manager at Huntington Asset Advisors in Cincinnati, said in an interview on Bloomberg Television. The capital flows around the globe are overwhelming what the Fed is able to do at this juncture.

Autodesk Inc. dropped $6.36 to $32.74. The software maker reported fourth-quarter profit, excluding compensation and acquisition costs, of 52 cents a share. That missed the 54-cent average of analysts' estimates.

Amgen Inc. lost $1.02 to $46.80. Johnson & Johnson, the world's biggest health-products maker, slipped 63 cents to $63.09. A study published in this week's Journal of the American Medical Association found that cancer patients who take anemia drugs sold by the companies have a 10 percent higher risk of dying than those who didn't take the treatments.

The risks of the anemia drugs are well-defined, and the newly published analysis looks exactly like what we've seen before, Roger Perlmutter, Amgen's head of research and development, said in an interview.