* Hopes of government aid to banks buoy stocks
* Drop in oil prices lifts retailers, airlines
* Dow up 0.2 pct, S&P up 0.1 pct, Nasdaq up 1.5 pct
* For up-to-the-minute market news, click []
(Updates to close)
By Leah Schnurr
NEW YORK, Jan 15 (Reuters) - U.S. stocks rose on Thursday
amid market optimism the government will act to prevent the
year-long recession from deepening, offsetting news Bank of
America <BAC.N> was seeking aid from Washington that had fueled
worries about the health of the financial sector.
Wall Street stocks finished well off earlier lows with the
Nasdaq outpacing the other key indexes as investors bet
technology companies in particular will benefit from a proposed
infrastructure plan.
Shares of Bank of America and Citigroup plummeted on fears
the embattled banks may need more government help to deal with
soaring credit losses. For details, see [] Bank of
America shed more than 18 percent, while Citigroup lost more
than 15 percent.
"All the bad news on banks is putting pressure on
Washington to get a stimulus package passed soon and that may
be lifting optimism some," said Hugh Johnson, chief investment
officer of Johnson Illington Advisors in Albany, New York.
The Dow Jones industrial average <> added 12.35 points,
or 0.15 percent, to 8,212.49. The Standard & Poor's 500 Index
<.SPX> rose 1.12 points, or 0.13 percent, to 843.74. The Nasdaq
Composite Index <> was up 22.20 points, or 1.49 percent,
at 1,511.84.
Trading was active on the New York Stock Exchange, with
about 1.65 billion shares changing hands, below last year's
estimated daily average of roughly 1.9 billion, while on
Nasdaq, about 2.50 billion shares traded, above last year's
daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by
1,670 to 1,420 while advancers beat decliners on the Nasdaq by
about 1,556 to 1,151.
The afternoon's advance helped the Dow snap a six-day
losing streak. But recent declines have left the broad S&P 500
up nearly 14 percent from the 11-year lows hit in late
November, after starting the year up 20 percent off those
lows.
In response to indications that the recession is deepening,
Democratic leaders in the U.S. House of Representatives
unveiled an $825 billion tax cut and spending bill, while a
Senate vote on the remaining $350 billion financial rescue
package was expected after the market closes.
Analysts said hopes that the government is willing to pull
out all the stops to shore up the embattled financial sector
and the larger economy helped stocks reverse earlier losses.
Investors fretted about the fate of Citigroup <C.N> a day
before the embattled bank is due to announce more losses and
lay out a plan about its strategic direction. Citigroup ended
down 15.5 percent at $3.83 while the S&P financial index
<.GSPF> tumbled 5.1 percent.
Bank of America gave up 18.4 percent at $8.32, making it
the Dow's biggest drag. The bank is in talks with the U.S.
government to receive about $15 billion in additional capital
from the Treasury's Troubled Asset Relief Program, according to
a source.
A steep drop in the price of oil <CLc1> helped
consumer-oriented sectors, including retailers and airlines, as
investors hoped lower energy costs will take some pressure off
cash-strapped consumers. The S&P retail index <.RLX> was up 3.9
percent, while the airline index <.XAL> rose 4.6 percent.
Oil settled down $1.88 at $35.40 barrel as heightened
economic gloom exacerbated worries that world energy demand
will keep shrinking.
Standout beneficiaries included home improvement retailer
Home Depot <HD.N>, which rose 4.1 percent to $22.81 to lead the
Dow's advance, offsetting the drag from Bank of America.
(Editing by Gary Crosse)
