Wall Street rises on Wachovia-Wells Fargo deal, bailout hopes

Investors bet the House, which earlier this week rejected the legislation, would pass a revised version of a US$700 billion bailout to stabilize the U.S. financial sector. A top Republican leader was optimistic the deal would pass. A vote is expected later on Friday.

The deal between Wells-Fargo, one of the strongest U.S. banks left, and Wachovia was a stock transaction valued at more than US$16 billion. It scuppered a deal announced on Monday and backed by the government for Citigroup to buy parts of Wachovia.

“The Wachovia deal I think gave some optimism to the market that someone is stepping in to buy Wachovia,” said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois. “I also think the bailout is going to go through. It could be a very big embarrassment if the House votes it down twice.”

The Dow Jones industrial average climbed 165.11 points, or 1.58 percent, to 10,647.96. The Standard & Poor’s 500 Index gained 24.78 points, or 2.22 percent, to 1,139.06. The Nasdaq Composite Index shot up 46.14 points, or 2.33 percent, to 2,022.86.

Shares of Wachovia, which had been hit with mortgage related losses, jumped 74.2 percent to US$6.81 on the New York Stock Exchange, while the S&P financial index climbed 2.5 percent.

Other standouts on the financial front were Goldman Sachs , up 5.6 percent at US$138.94 and Bank of America, up 4.2 percent at US$37.91. But shares of Citigroup declined almost 10 percent to US$20.25.

On Nasdaq shares of Apple Inc jumped more than 4 percent to US$104.69, making the stock a top boost, after the iPod and iPhone maker denied an Internet report claiming that Chief Executive Steve Jobs had a heart attack. Earlier, Apple had dropped as much as 5 percent.

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