Bush deal gives boost to US stocks

UNITED States shares have posted their steepest two-week advance since September after President George W. Bush announced a plan to freeze some mortgage rates to prevent foreclosures from causing a recession.

Centex Corp and DR Horton Inc led homebuilders as they climbed the most in seven years. Intel Corp, Micron Technology Inc and other semiconductor companies in the Standard & Poor's 500 Index rose the most since June following analyst predictions that demand for computers will increase. All 10 industries in the S&P 500 gained.

Stocks have rebounded after losing their 2007 gain at the end of last month, spurred by speculation the Federal Reserve will reduce interest rates to prop up the world's largest economy. The S&P 500 declined on Friday after a Labor Department report showed US employers added more jobs than estimated in November, diminishing the odds that central bankers will cut their rate benchmark by half a point tomorrow, Bloomberg News said.

"The economy is slowing, but it's not falling off a cliff," Jeremy Siegel, an economics professor at the University of Pennsylvania's Wharton School of Business, said during an interview in New York. "That's important for investors."

The S&P 500 added 1.6 percent to 1,504.66, bringing its two-week gain to 4.4 percent and its advance this year to 6.1 percent. The Dow Jones Industrial Average rose 1.9 percent to 13,625.58. The Nasdaq Composite Index climbed 1.7 percent to 2,706.16.

Ten-year Treasury yields had the first weekly gain since October, rising to 4.11 percent, as traders pared bets that the Fed will reduce its rate benchmark by more than a quarter point. Two-year yields rose to 3.10 percent.

Homebuilders in the S&P 500, which fell as much as 78 percent from their July 2005 peak through November 27, added 17 percent for the steepest weekly advance since August 2000. Centex gained the most, climbing 24 percent to US$25.81. DR Horton rose 16 percent to US$13.86.

Bush announced last Thursday an agreement between the government and the lending industry that would freeze rates for five years on some variable rate mortgages and provide assistance to as many as 1.2 million homeowners.

The government's plan may help end the recession in the US housing market, which is entering its third year. The number of Americans behind on their mortgage payments in the third quarter was the highest in 20 years, the Mortgage Bankers Association said last Thursday.

"The economy will muddle through without tipping into recession," said Joshua Feinman, chief economist in New York at Deutsche Asset Management, which oversees US$798 billion. Growth will accelerate during the second half of next year, he said.