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"Banks and builders climbed after former Federal Reserve Chairman Alan Greenspan told the Wall Street Journal that the housing market may recover next year"
By Lynn Thomasson
Aug. 14 (Bloomberg) -- U.S. stocks rose for the first time in three days after a trade group loosened restrictions on Fannie Mae and Freddie Mac to help revive the mortgage industry.
Fannie Mae and Freddie Mac, the largest sources of financing for U.S. home loans, each jumped more than 5 percent after the Securities Industry and Financial Markets Association said larger loans financed by the two companies will be allowed in the main market for mortgage bonds. PMI Group Inc., the second-biggest mortgage insurer, rallied 60 percent on plans to raise cash by selling businesses. General Motors Corp. climbed the most in a month on falling oil prices and the automaker's plan to accelerate a cost-cutting program.
The Standard & Poor's 500 Index added 6.91 points, or 0.5 percent, to 1,292.74 at 3:44 p.m. in New York. The Dow Jones Industrial Average increased 84.03, or 0.7 percent, to 11,616.99. The Nasdaq Composite Index added 24.55 to 2,453.17. Two stocks rose for each that dropped on the New York Stock Exchange.
``Financials, while extraordinarily beaten down and with extraordinarily negative sentiment, I think two years from now will have been a brilliant move,'' Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $162 billion, told Bloomberg Television.
The S&P 500 Financials Index rallied 1.7 percent, recovering about a quarter of its two-day drop of 8 percent. The group is up 22 percent from its 2008 low on July 15. The gain in banks overpowered earlier declines in benchmark indexes spurred by higher-than-forecast growth in consumer prices.
Fannie Mae added 5.4 percent to $8.05. Freddie Mac increased 6.3 percent to $5.90. Revised guidelines for the so-called To Be Announced market will accept securities composed of as much as 10 percent of the loans, according to a statement from the trade group. The group said jumbo mortgage borrowers may pay lower interest rates as a result of the change.
PMI Rallies
PMI surged 60 percent to $4.47 after agreeing to sell its Australian and Asian businesses to QBE Insurance Group Ltd. for about $896 million. MGIC Investment Corp., PMI's larger rival, jumped 8.9 percent to $7.74.
An index of homebuilders in S&P indexes rallied 4.6 percent.
www.bloomberg.com/apps/...20601087&sid=aMBghooVLU7E&refer=home
You only learn who has been swimming naked when the tide goes out - W.Buffett
