(Agencies)
Updated: 2008-03-19 07:24

FINANCIAL SHARES DRIVE GAINS

US and European stocks had rallied in anticipation of a rate cut aimed at easing a global credit crunch, and after the profit reports from Goldman Sachs and Lehman Brothers topped Wall Street estimates.

Investors were reassured that US financial companies are holding up despite market turmoil caused by the subprime mortgage crisis and a slowing US economy.

Stocks may be trading off a floor and could be poised for a significant rebound in coming months, which has made David Joy, market strategist at RiverSource Investments, a unit of Ameriprise Financial Inc in Minneapolis, a selective buyer.

"We don't think the economy is quite as bad as people think. We're discounting worse expectations than we're likely to get," said Joy. "That's not to say we don't recognize the risks out there and the problems. But gosh, it looks to us like value is beginning to emerge in a number of places."

It was the best day for financial stocks since March 2000, while top US home finance companies Fannie Mae and Freddie Mae surged the most in 20 years. Fannie soared 27 percent to $28.22, and Freddie climbed 26 percent to $26.02.  Homebuilders also rose sharply.

Expectations that regulators will ease restrictions on Fannie Mae and Freddie Mac and encourage them to boost spending in the slumping US housing market also eased investor jitters.

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