Stocks rose on Wednesday as a labor agreement at General Motors Corp. promised to cutcosts for Detroit's automakers, while a report that Bear Stearns may sell a stake to outside investors lifted brokerage stocks.
The Dow Jones industrial average gained 99.50 points, or 0.72 percent, to end at 13,878.15. The Standard & Poor's 500 Index advanced 8.21 points, or 0.54 percent, to 1,525.42. The Nasdaq Composite Indexrose 15.58 points, or 0.58 percent, to close at 2,699.03.
The Amex Securities broker dealer index was up 2.1 percent.
The GM (GM) accord, which requires approval by members of the United Auto Workers union, would set up a health-care trust fund aimed at reducing the automaker's medical costs. GM shares rose 9.4 percent, while the stock of Ford Motor Co (F), which is expected to cut a similar deal, rose 6.5 percent.
Shares of Bear Stearns Cos (BSC) surged 7.7 percent to $123 after The New York Times reported the broker is in serious talks about selling as much as 20 percent of the company to Warren Buffett and other investors.
The news signaled that traders were finding value in companies plagued by their exposure to the stricken subprime mortgage market.
"When you have a sophisticated investor and the second-wealthiest person in the universe interested in Bear Stearns, then this may be signaling the company is about to turn the corner," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC, in Princeton, New Jersey.
"Financials have been lagging and now that Buffett is showing interest, it elevates the value of all financial-related companies."
However, shares of student lender Sallie Mae (SLM) declined 2.7 percent to $45.01 late in the day after it said it was informed by the consortium that planned to buy it that the group does not expect to close the acquisition under the terms of the merger agreement.
In the financial sector, shares of Merrill Lynch & Co. Inc. (MER) slipped 0.5 percent to $71.75 after Goldman Sachs cut its third-quarter profit view on the U.S. investment bank. The stock had fallen as low as $69.91 earlier in the day.
In a research note, Goldman said Merrill's fixed-income business could lose $1.5 billion in the third quarter, citing among other factors, fallout from losses stemming from leveraged loans and mortgages.
The GM deal allows the company to shift more than $50 billion of retiree health-care liabilities to an independent union-aligned trust fund.
"It's good news for the motor stocks; there was some fear there might be a more protracted shutdown and that fear has been eliminated," said Michael Metz, chief investment strategist at Oppenheimer & Co.
Shares of GM, the biggest U.S. automaker, jumped to $37.64, while shares of Ford climbed to $8.88. Shares of auto-parts makers also jumped on the GM news, with Johnson Controls (JCI) up 2.3 percent at $116.45.
Companies that would benefit most from another cut in interest rates got a boost from data showing a larger-than-expected drop in August orders for durable goods -- manufactured items meant to last three years or more.
IBM shares gained 0.7 percent to $117.30 on the NYSE, while shares of Cisco climbed 1.7 percent to $32.99 on the Nasdaq.
The day's trading activity was also influenced by quarter- and month-end portfolio realignment, Metz said.
Trading was below average on the New York Stock Exchange, with about 1.29 billion shares changing hands versus last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.04 billion shares traded, ahead of last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 2 to 1 on the NYSE and by 3 to 2 on Nasdaq.