US STOCKS-Wall St rallies 3 percent in broad advance

Larger Smaller Reset NEW YORK (Dec 20): U.S. stocks rallied nearly 3
percent on Tuesday as investors bought surging banks, homebuilders and
networking companies, though low volume was seen as amplifying the
market's move.

Investors jumped on a banking sector that was
already riding high, extending gains after the U.S. Federal Reserve
released new capital proposals that turned out to be less onerous than
the market feared.

The KBW Banks index leaped 4.1 percent while
JPMorgan Chase & Co was up 5 percent to $32.22 and Wells Fargo &
Co added 4.6 percent to $26.47.

"Investors have been looking
for clarity on the regulatory outlook, and I don't think these rules are
so strict that we should expect anything like significant dividend
cuts," said Matt McCormick, a money manager at Cincinnati-based Bahl
& Gaynor Inc.

Homebuilders also gained on strong housing
figures. The Dow Jones home CONSTRUCTION [] index jumped 6 percent, led
by Pultegroup, the second-largest U.S. homebuilder, up 10 percent at
$6.15, and MDC Holding, up 7.3 percent at $17.35.

Networking
companies completed the grab bag of diverse sectors seeing the biggest
gains. Those stocks rallied after AT&T Inc dropped its bid for
T-Mobile USA, the Deutsche Telekom unit, as investors anticipate
spending on wireless equipment will accelerate.

U.S.-listed
shares of Alcatel-Lucent surged 13 percent to $1.57 and Juniper Networks
Inc climbed 9.1 percent to $19.76. The NYSE Arca Networking index
jumped 5.9 percent. AT&T rose 1.3 percent to $29.11.

The Dow
Jones industrial average was up 335.73 points, or 2.87 percent, at
12,103.58. The Standard & Poor's 500 Index was up 35.95 points, or
2.98 percent, at 1,241.30. The Nasdaq Composite Index was up 80.59
points, or 3.19 percent, at 2,603.73.

After the market closed,
shares of Oracle Corp slumped 7.7 percent to $26.92 in extended trading.
The company reported software and hardware sales that missed its own
forecasts.

U.S. housing starts and permits for future
construction surged to a 1-1/2 year high in November as demand for
rental apartments rose. The news reinforced the view that the U.S.
economy will continue to see moderate growth.

Cyclical
industries like materials were among the day's top gainers, though all
10 S&P sectors rose more than 1.5 percent. Materials climbed 4.1
percent while energy advanced 4 percent alongside a 3.6 percent jump in
crude prices.

The day was the best for the S&P 500 since Nov. 30, and narrowed the index's losses for the year to 1.3 percent.

Headlines and fluctuating European bond prices continue to spark high
volatility. Stocks will be prone to large swings this week on expected
low volume due to the upcoming Christmas and New Year's Day holidays.

"From a short-term point of view, we were probably due for a bounce
given recent losses, but I don't think we would see a move of this
magnitude without the light volume," said Michael Matousek, senior
trader at U.S. Global Investors Inc., which manages about $3 billion in
San Antonio.

About 6.83 billion shares traded on the New York
Stock Exchange, the American Stock Exchange and Nasdaq, below last
year's daily average of 8.47 billion.

Short-term financing costs
for struggling Spain more than halved as banks lapped up debt at an
auction. The firepower is apparently coming from the European Central
Bank's first-ever three-year funding tender on Wednesday. Investors hope
banks will use the cheap funding to buy debt of fiscally troubled EU
nations.

Investors have been focused on how the large southern
European economies will refinance debt next year if financing costs
remain excessively high. Any sign yields may be easing is seen as a
positive for markets.

The S&P 500 has gained an average of
1.6 percent in the last five days of the year and the first two days in
January since 1969, according to the Stock Traders Almanac.

The
phenomenon is called the Santa Claus rally. Occasions when the market
does not rally during those dates often precede a bear market, the
Almanac says.

About 86 percent of stocks traded on the New York
Stock Exchange closed in positive territory while four-fifths of
Nasdaq-listed shares closed higher. - Reuters