By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks shot up the most in two weeks on Tuesday after strong demand for a Lehman Brothers
A $19 billion write-down by Swiss bank UBS AG
Technology stocks also had a strong day. The Nasdaq leaped more than 3 percent, helped by Microsoft, whose shares rose 4 percent after the company said it would not raise its takeover offer for Yahoo Inc.
"We're getting to the point where people are starting to believe the magnitude of the write-offs is peaking," said Owen Fitzpatrick, head of the U.S. Equity Group at Deutsche Bank Private Wealth Management, in New York. "And, it's Lehman being able to come to market and offer securities. People are interested in placing capital within financials."
For a second day, traders took solace from economic data that was not as dire as forecast. The Institute for Supply Management said its national manufacturing index for March contracted again, but not by as much as economists had predicted.
The Dow Jones industrial average <.DJI> gained 391.47 points, or 3.19 percent, to end at 12,654.36. The Standard & Poor's 500 Index <.SPX> rose 47.48 points, or 3.59 percent, to 1,370.18. The Nasdaq Composite Index <.IXIC> jumped 83.65 points, or 3.67 percent, to 2,362.75.
Stocks posted their best gains since March 18, the day that the Federal Reserve's policy makers last cut interest rates. Tuesday's rally also marked a strong start for the first day of the second quarter.
Lehman Brothers Holdings Inc's stock jumped 17.8 percent to $44.34 after the investment bank said it raised $4 billion of capital in an offering of convertible preferred shares.
That eased investors' anxiety after Bear Stearns nearly collapsed last month amid a liquidity crisis. The U.S. Federal Reserve encouraged JPMorgan Chase & Co
Bear Stearns' stock ended up 3.4 percent at $10.85 on the
JPMorgan's stock, which contributed the most to the advance of both the Dow and the S&P 500, climbed 9.4 percent to close at $47.00 on the New York Stock Exchange.
The S&P financial index <.GSPF> surged 7.5 percent, while shares of Bank of America shot up 7.8 percent to $40.86 and the stock of Citigroup leaped 11.3 percent to $23.84.
Offering more relief to investors was UBS, which said it wrote down an additional $19 billion on U.S. real estate and related assets and unveiled a massive increase in capital. Its U.S.-listed shares
On the Nasdaq, Microsoft rose to $29.49. People familiar with Microsoft's plans said the company sees no reason to increase its bid for Yahoo Inc
Early in the session, the Institute for Supply Management said its index of national factory activity edged up in March, but remained below the level that separates growth from contraction. Still, it beat expectations, which caused stock investors to cheer.
Trading was active on the New York Stock Exchange, with about 1.70 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.16 billion shares traded, just below last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by more than 5 to 1 and by 3 to 1 on Nasdaq.
(Editing by Jan Paschal)