* Progress on bank rescue plan buoys sentiment
* U.S. House OKs $825 bln economic stimulus bill
* Dow up 2.5 pct, S&P up 3.4 pct, Nasdaq up 3.6 pct
* For up-to-the-minute market news, click []
(Updates close with House passage of economic stimulus bill)
By Ellis Mnyandu
NEW YORK, Jan 28 (Reuters) - U.S. stocks rose on
Wednesday, capping the S&P 500's longest winning streak since
November, as financial stocks soared on optimism the Obama
administration was making progress on a plan to relieve banks
of money-losing assets.
Stocks initially added gains following the Federal
Reserve's statement that it is prepared to buy long-term U.S.
government debt, but the boost faded upon the realization that
the Fed's purchases won't be made any time soon.
Financial stocks stood out, with JPMorgan <JPM.N> among
the Dow's top advancers with a gain of 10.4 percent. Bank of
America <BAC.N> climbed nearly 14 percent, while Citigroup
<C.N> shot up more than 18 percent.
The S&P financial index <.GSPF> rose 13 percent on reports
that plans were advancing to create a "bad bank" that would
mop up assets whose worth has plummeted, and in turn help
revive lending to consumers and businesses.
"What moved the market earlier in the day is the bad bank
concept gaining more acceptance," said Eric Kuby, chief
investment officer at NorthStar Investment Management Corp in
Chicago. "I don't think there are any big shockers from the
Fed's statement."
The Dow Jones industrial average <> finished up 200.72
points, or 2.46 percent, at 8,375.45. The Standard & Poor's
500 Index <.SPX> climbed 28.38 points, or 3.36 percent, to
874.09. The Nasdaq Composite Index <> ended up 53.44
points, or 3.55 percent, at 1,558.34.
STARBUCKS LOSES FROTH
But after the bell, companies including Starbucks Corp
<SBUX.O> coaxed investors back down to earth with a reality
check. The coffee chain missed profit estimates, sending its
stock down more than 2 percent to $9.40 after hours.
In other news after the market's close, Qualcomm Inc
<QCOM.O>, the largest maker of cell-phone chips, cut its
fiscal 2009 revenue outlook and Allstate Corp <ALL.N>, the
largest publicly traded home and auto insurer, reported a $1.1
billion quarterly loss. Qualcomm's stock lost 2.6 percent to
$35.88 in extended-hours trading, while Allstate's shares
plunged 11 percent to $26.35 after hours.
When trading resumes on Thursday, investors are also
likely to focus on the U.S. House of Representatives' approval
late Wednesday of an $825 billion economic stimulus bill. The
House voted 244 to 188 to pass the bill containing President
Barack Obama's program for emergency spending and tax cuts.
The measure next goes to the U.S. Senate for debate, starting
probably sometime next week.
S&P'S REBOUND
With Wednesday's advance, the benchmark S&P 500 capped its
fourth straight day of gains, its longest run-up in two
months.
Worries about the financial sector's health have been the
biggest hurdle for the market, fueling unease about stocks'
performance in January, which is traditionally seen as a guide
to the year's prospects.
On recent bets that the government will save the day, the
indexes have swiftly erased most of their year-to-date
losses.
Year to date, the benchmark S&P 500 is now down 3.2
percent, a marked improvement from a 6.4 percent loss seen at
Tuesday's close. After starting 2009 up more than 20 percent
from its Nov. 21 bear market low, the S&P is up 16.2 percent
from that significant low.
BANKING ON WASHINGTON
Adding to confidence in banks, an industry source said
Sheila Bair, the chairman of the Federal Deposit Insurance
Corp, is floating the idea that the FDIC could manage the "bad
bank." For details see [].
JPMorgan shares rose $2.60, or 10.4 percent, to $27.66 on
the New York Stock Exchange, while Bank of America finished at
$7.39. The Financial Select Sector SPDR <XLF.P>, a financial
exchange-traded fund, gained 12.7 percent.
The "bad bank" option had an effect on the market beyond
financials as a loosening up of lending would drive both
consumer and business spending, and motivate investors.
Technology shares jumped, led by such bellwethers as
iPhone maker Apple Inc <AAPL.O>, up 3.8 percent at $94.20 on
Nasdaq. International Business Machines Corp <IBM.N>, a
technology services heavyweight, was the Dow's top advancer,
finishing up 3.5 percent at $94.82 on the NYSE.
Internet media company Yahoo Inc <YHOO.O> climbed 8
percent to $12.24 after it posted quarterly results late on
Tuesday that beat analysts' expectations.
Following its two-day policy meeting, the U.S. Federal
Reserve also signaled in its statement some concern that
deflation risks were rising. The central bank's policy-setting
panel held its fed funds target range for overnight interest
rates at zero to 0.25 percent -- the level reached in
December. []
Volume was active on the New York Stock Exchange, where
about 1.55 billion shares changed hands, above last year's
estimated daily average volume of 1.49 billion shares, while
on the Nasdaq, about 2.17 billion shares traded, below last
year's daily average of 2.28 billion.
Advancers outnumbered decliners on the NYSE by a ratio of
more than 6 to 1, while on the Nasdaq, about seven stocks rose
for every two that fell.
(Additional reporting Deepa Seetharaman; Editing by Jan
Paschal)
