Buyout buoys Wall Street

Unexpected home sales surprise, too

NEW YORK -- Wall Street extended its big advance Monday as investors applauded a new agreement that will give Bear Stearns shareholders five times the payout that was set in a JPMorgan Chase buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report.

The revised Bear Stearns offer and the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort.

"It appears that people are interested in buying stocks every time there's just a whiff of good news," John Carey, a fund manager at Pioneer Investments in Boston, said in an interview with Bloomberg Radio. "We're starting from a fairly modest level of valuations in this downturn and so perhaps people are right in suggesting that downside is limited."

The S&P 500 trimmed its loss for the year to 8.1 percent and posted its first back-to-back gains of the month.

The Dow Jones industrial average rose 187.32, or 1.52 percent, to 12,548.64, after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.

The Standard & Poor's 500 index rose 20.37, or 1.53 percent, to 1,349.88, and the Nasdaq composite index rose 68.64, or 3.04 percent, to 2,326.75.

Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 1.57 billion shares.

Bond prices fell sharply as investors felt less of a need for the safety of government bonds, and also rushed to join the stock market rally. The yield on the benchmark 10-year Treasury note, which moves opposite its price, shot up to 3.56 percent from 3.34 percent late Thursday, a huge advance that reflected the shift in market sentiment. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 98 cents to settle at $100.86 per barrel on the New York Mercantile Exchange.

Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, said further readings on the housing sector, including a report on home prices due today, could help determine whether Wall Street's enthusiasm will continue or prove short-lived. Further weakness in housing, he said, could mean banks will continue to struggle with a locked-up credit market.

Still, the Fed's move to broker the Bear Stearns buyout has allowed investors the sense that not all the debt guaranteed by mortgages is "nuclear waste." It will be some time before Wall Street knows whether the write-downs on mortgages already taken will be sufficient.

"The fact that the Fed is willing to come in and buy it at some level makes people think 'OK, it's not zero,' " Smith said, referring to the troubled debt.

Overseas, Japan's Nikkei stock average closed down 0.02 percent. Markets in Europe and in Hong Kong were closed for Easter Monday.