NEW YORK - Wall Street rallied again yesterday as investors bet that firms hurt by the housing crisis would benefit from a federal plan to help financially stressed homeowners and from an interest-rate cut.
The Dow Jones industrial average surged more than 170 points after a rise Wednesday of nearly 200 points.
Wall Street has been concerned about the housing slump's impact on consumers, and trading started out shaky yesterday after Target Corp. released lackluster sales data and a downbeat December outlook.
But stocks then pushed higher; weak consumer spending, though bad for corporate profits, at least supports the argument for the Federal Reserve to lower interest rates when it meets Tuesday. A rate cut could help reinvigorate the slowing economy and loosen up the tight credit markets.
Stocks got an additional boost when President Bush announced a plan allowing some homeowners facing foreclosure to not only freeze their mortgage interest rates for up to five years, but also to refinance their home loans.
"That's providing a glimmer of hope," said Jim Herrick, director of equity trading at Baird & Co. "But there's some skepticism. Is this really going to be the panacea to the subprime market? That's the $64,000 question."
The Dow industrials rose 174.93, or 1.30 percent, to 13,619.89. The blue-chip index is still 3.8 percent below its Oct. 9 closing record of 14,164.53, but has surged nearly 6.9 percent over the last week and a half after incurring huge losses in early to mid-November.
Broader indicators also extended their gains. The Standard & Poor's 500 index rose 22.33, or 1.50 percent, to 1,507.34, and the Nasdaq composite index rose 42.67, or 1.60 percent, to 2,709.03.
Bond prices fell as investors returned to stocks. The yield on the 10-year Treasury note, which moves opposite to its price, rose to 4.02 percent from 3.95 percent late Tuesday.
Mortgage lender Countrywide Financial Corp. rose $1.68, or 16.12 percent, to $12.10 on news of the government mortgage-rate plan.
Target fell $4.56, or 7.58 percent, to $55.57 after predicting that December sales would fall short of its previous forecast.