US Stock market rallys on revised Bear Stearns deal

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Bond prices fell sharply as investors felt less of a need for the safety of government bonds, and also rushed to join the stock market rally. The yield on the benchmark 10-year Treasury note, which moves opposite its price, shot up to 3.53 percent from 3.34 percent late Thursday, a huge advance that reflected the shift in market sentiment.

The 10-year Treasury's yield moved up to 3.55 percent in after-hours trading.

Meanwhile, the dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 98 cents to settle at $100.86 per barrel on the New York Mercantile Exchange.

The housing sector, which has offered a steady drumbeat of mostly negative news in recent months, gave investors a welcome lift. The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and Wall Street had expected a slight decline. Still, the median home price fell by the largest amount on record.

Smith said further readings on the housing sector, including a report on home prices due Tuesday, could help determine whether Wall Street's enthusiasm will continue or prove short-lived. Further weakness in housing, he said, could mean banks will continue to struggle with a locked-up credit market.

Still, the Fed's move to broker the Bear Stearns buyout has allowed investors the sense that not all the debt guaranteed by mortgages is "nuclear waste." It will be some time before Wall Street knows whether the write-downs on mortgages already taken will be sufficient.

"The fact that the Fed is willing to come in and buy it at some level makes people think 'OK, it's not zero,'" Smith said, referring to the troubled debt.

Denis Amato, chief investment officer at Ancora Advisors in Cleveland, is skeptical that Wall Street might have put its troubles behind it with the Bear Stearns deal. He said the Fed's extraordinary steps a week ago to lend aid to the struggling investment banks and accept as collateral much of the now-shunned debt was helping the market, but that investors will likely face further concerns.

"I just can't remember in my career having an instance where you know within a week what the watershed event was. Now we all know and that makes me a little bit nervous," he said of those conjecturing that the Bear Stearns deal marks the stock market's bottom.

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