Stocks Higher as Investors Bite on Bargain Opportunities

U.S. stocks rallied Tuesday, snapping a three-day losing streak as opportunities to buy cheap shares in beaten-down sectors like financial services enticed some investors back into the market after nearly a week of steep declines.

The Dow Jones industrial average was up 157.18 points, or 1.30 percent, to end at 12,207.59. The Standard & Poor's 500 Index was up 21.29 points, or 1.55 percent, at 1,395.41. The Nasdaq Composite Index was up 44.46 points, or 1.90 percent, at 2,385.14.

All three major indexes rose more than 1 percent. The Dow industrials, the benchmark S&P 500 index and the Russell 2000 index of small companies' stocks achieved their biggest one-day percentage gains since July.

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Financial services stocks were among the top performers, driving the S&P Financial sector index up 2.1 percent, as shares of mortgage lenders rebounded.

News of takeover deals, including a $10 billion bid by Citigroup (C) for Japan's third-largest securities company, also boosted investor optimism.

"It's a relief rally," said Neil Wolfson, president of investment management at Wilmington Trust in New York. "Valuations got to be pretty cheap, so some of the value hunters have come into the market and it's really been a bit of a buyer's paradise."

The Nasdaq turned in its biggest one-day percentage gain since last October.

Stocks closed just off their session highs as the New York Stock Exchange instituted upside trading curbs in the last hour of trading.

Advancing shares outnumbered declining ones by their biggest margin since August on the New York Stock Exchange and by the greatest margin since June on the Nasdaq. More than four shares rose for every one that fell on both the NYSE and the Nasdaq.

The U.S. stock market's advance tracked gains in overseas equities, with share indexes across most of Asia up between 1 percent and 2 percent and European stocks up 1 percent after last week's sell-off cost stock investors nearly $2 trillion globally.

Citigroup, the largest U.S. banking company, bid for Japanese broker Nikko Cordial Corp. . Shares of Citigroup jumped 2.7 percent, or $1.33, to $50.58 and ranked as the top positive influence on the S&P 500.

Shares of subprime mortgage lenders, including New Century Financial Corp. (NEW), recovered some of their steep losses from the previous session, when investors feared an industry-wide shakeout.

New Century's stock rose 10.1 percent, or 46 cents, to $5.02, while shares of rival Fremont General Corp. surged 15.1 percent, or 89 cents, to $6.78.

Altria Group Inc. (MO) shares ranked No. 1 among the Dow's biggest advancers after Deutsche Bank raised its rating on the tobacco company. It said the upgrade was based on valuation. Altria's stock rose 2.7 percent, or $2.21, to $84.42.

Wall Street's gains also came in the face of weak economic data after reports showed pending sales of existing U.S. homes fell more sharply than expected in January and a report that new orders for U.S. factories tumbled more than expected in the month.

Also on the economic front, former Federal Reserve Chairman Alan Greenspan was quoted as saying he sees a "one-third probability" of recession in the United States this year, according to a Bloomberg interview.

Trading was active on the New York Stock Exchange with about 1.84 billion shares changing hands, even with its daily average for last year.

On Nasdaq, about 2.20 billion shares traded, above the 2.02 billion daily average last year.

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