Wall Street shook off a weak start and surging oil prices and got a lift from mortgage finance giant Fannie Mae, which reversed course to lead stocks higher despite suffering a big quarterly loss.

The Dow Jones Industrial Average of blue chips gained 51.29 points (0.40 percent) to close at 13 020.83 while the technology-dominated Nasdaq composite climbed 19.19 points (0.78 percent) to 2483.31.

The broad-market Standard & Poor's 500 index gained 10.77 points (0.77 percent) to finish at 1418.26.

Wall Street opened with sentiment weak as crude oil reached a new record high price above 122 dollars a barrel amid new concerns over tight supplies and a struggling US currency.

Some called the Fannie Mae earnings report "ugly" as the mortgage giant posted a net loss of $2.19-billion and announced plans to raise fresh capital.

But Al Goldman at Wachovia Securities said the government-sponsored finance firm rebounded "as comments on a conference call reassured investors."

Ryan Detrick at Schaeffer's Investment Research noted that the market rebounded from its early lows, and "as the day wore on, buyers continued to step in and push the market higher. This is another sign that the overall trend of the market is turning higher."

"Called the bottom"

Although Fannie Mae said the US housing market remained weak, Kevin Depew at the financial website Minyanville said the finance giant "has inadvertently called the bottom in the housing market" with the details of its market outlook, which was not as weak as some analysts had predicted.

Briefing.com analysts said that an announcement that government regulators will be reducing Fannie's capital requirement level to 15 percent from 20 percent "may have aided in the stock's reversal."

Fannie Mae, which buys loans and repackages them to investors to pump liquidity into housing, saw its share leap 8.91 percent to close at 30.81 dollars.

Freddie Mac, a similar government-sponsored mortgage finance firm, rallied 7.09 percent to 27.33 dollars.

Energy companies benefitted from the surge in crude oil. Chevron advanced 1.3 percent to 96.87 dollars.

Elsewhere, casino giant MGM Mirage rallied 6.6 percent to 51.85 dollars after reporting a drop in profits not quite as steep as feared.

Yahoo rebounded from a steep drop in the prior session, gaining 5.6 percent to 25.72 dollars as investors mulled the next move for the Internet giant after Microsoft ended its takeover bid. Microsoft shares advanced 2.1 percent to 29.70.

Bonds fell, reversing early gains. The yield on the 10-year US Treasury bond rose to 3.893 percent from 3.845 percent on Monday while that on the 30-year bond climbed to 4.642 percent against 4.581 percent. Bond yields and prices move in opposite directions.

AFP