* Stimulus optimism, housing data buoy sentiment
* Merck's solid profit lifts pharmaceutical stocks
* Indexes rise more than 1 pct
* For up-to-the-minute market news, click []
(Updates with Disney dropping after-the-bell, adds volume in
last two paragraphs)
By Ellis Mnyandu
NEW YORK, Feb 3 (Reuters) - U.S. stocks rose on Tuesday as
news of an alternative stimulus plan from Senate Republicans
suggested lawmakers were moving closer to a package that would
soften the blow of a deepening recession.
A surprise rise in December pending home sales also buoyed
sentiment, while a solid profit from drugmaker Merck <MRK.N>
offered a rare bit of welcome news in an otherwise gloomy
earnings season.
"The fact that we've gotten at least a counter-proposal
makes it more likely that something will pass," said Michael
James, senior trader at regional investment bank Wedbush Morgan
in Los Angeles.
"There was some concern that we might not get a (stimulus)
bill passed a couple of days ago. That certainly added to the
market's big move at the end of the day."
Merck shares climbed more than 6 percent, making
health-care stocks one of the biggest boosts to both the Dow
and the S&P 500. Schering-Plough <SGP.N> also posted quarterly
results ahead of Wall Street targets, sending its stock up more
than 8 percent.
The Dow Jones industrial average <> jumped 141.53
points, or 1.78 percent, to 8,078.36. The Standard & Poor's 500
Index <.SPX> added 13.07 points, or 1.58 percent, to 838.51.
The Nasdaq Composite Index <> shot up 21.87 points, or
1.46 percent, to 1,516.30.
A group of Republican U.S. senators offered a $445 billion
alternative plan to boosting the ailing economy, about half of
which would be in the form of tax cuts. The plan is an
alternative to the $885 billion package crafted by Democrats
who control the Senate. For details, see []
DISNEY DISAPPOINTS
But even with the optimism, there was some unsettling news
after the bell as Walt Disney Co <DIS.N> ,considered a
bellwether for consumer spending, posted a 32 percent slide in
quarterly profit, worse than expected. Its stock, a Dow
component, slid than 9 percent to $18.70 after-hours, from a
close of $20.62 on the New York Stock Exchange.
Disney's results could potentially unnerve investors on
Wednesday.
In the regular session, technology notched a strong advance
for a second straight day as shares of such bellwethers as
Microsoft <MSFT.O> rallied on hopes that government stimulus
plans will boost consumer and business spending, offsetting a
disappointing outlook from flash memory card maker SanDisk Corp
<SNDK.O>.
Microsoft, up 3.8 percent at $18.50, was the top boost on
Nasdaq, and the software maker capped its strongest two-day
run-up in nearly two months. Tech services company
International Business Machines Corp <IBM.N> led the Dow,
finishing up 2.8 percent at $93.48.
Merck shares finished 6.4 percent higher at $30.24, while
Schering-Plough climbed 8.2 percent to $18.91. Drug companies
are a defensive play as their business is considered better
able to withstand a downbeat economy. The pharmaceutical index
<.DRG> rose 3 percent.
Investors saw a glimmer of hope in the battered housing
market after pending sales of existing homes rose 6.3 percent
in December, sparking an 8.5 percent rise in the Dow Jones home
construction index <.DJUSHB>.
Shares of luxury home builder Toll Brothers <TOL.N> gained
6.4 percent to $18.06. Shares of D.R. Horton <DHI.N> surged
21.4 percent to $7.42 after the home builder posted a
smaller-than-expected quarterly loss.
BANK WOES
Bank shares slid, however, due to uncertainty about the
Obama administration's plans to shore up the beleaguered
financial sector. JPMorgan <JPM.N> ,down 4.6 percent at $24.05,
was the top drag on the Dow, followed by American Express
<AXP.N> ,off 5.2 percent to $16.09.
Bank of America <BAC.N> sagged for a fourth straight day,
ending 11.8 percent lower at $5.30 on the New York Stock
Exchange. The Obama administration is due to make an
announcement about its bank plan next week.
Shares of SanDisk, whose chips are used in cell phones and
digital cameras, plunged 23.2 percent to $8.66, a day after it
gave a disappointing outlook and said it may undertake an
equity offering that could dilute shares as much as 20
percent.
Volume was moderate on the New York Stock Exchange, where
about 1.35 billion shares changed hands, below last year's
estimated daily average volume of 1.49 billion shares, while on
the Nasdaq, about 2.12 billion shares traded, below last year's
daily average of 2.28 billion.
Advancers outnumbered decliners on the NYSE by a ratio of
about 8 to 5, while on the Nasdaq, about four stocks rose for
every 3 that fell.
(Editing by Leslie Adler)
