NEW YORK - US stocks finished with a rally on Thursday as concerns eased about a big loss sustained by bond insurer MBIA which had triggered fresh concerns about the already troubled financial sector.
Analysts said worries had abated in afternoon trading over MBIA, which reported a full year 2007 loss of US$1.9 billion (S$2.7 billion) earlier Thursday, after the bond insurer's chief executive, Mr Gary Dunton, said the firm had raised fresh capital.

The Dow Jones Industrial Average surged 207.53 points, or 1.67 per cent, to close at 12,650.36, rebounding strongly from morning losses.

The tech-heavy Nasdaq composite jumped 40.86 points, or 1.74 per cent to 2,389.86 while the Standard & Poor's 500 index gained 22.74 points, or 1.68 per cent to a close of 1,378.55.

Worries that MBIA was suffering financial losses rippled through the markets because it is one of the biggest players in the bond market. The firm insures a range of bonds including municipal bonds and securities linked to mortgages.

'We are disappointed in our operating results for the year,' Mr Dunton told investors, while stressing that MBIA had succeeded in raising fresh capital to shore up its financial position.

The Dow also notched up hefty gains a day after the Federal Reserve slashed its main interest rate by half-a-percentage point to 3.00 per cent in a bid to shore up faltering economic growth.

A government report Wednesday showed that growth in the world's biggest economy slumped to a 0.6 per cent annualised crawl compared with a blistering 4.9 per cent clip in the third quarter.

'The tone remains poor and it will take time for the focus on all things bearish to change. But the rapid rate cuts and the lack of broad deterioration in economic trends to recessionary levels will eventually have an impact,' said Mr Dick Green, a market analyst at Briefing.com.

Analysts said a jump in weekly jobless claims had also spooked some investors in earlier trading, as the government reported that claims for weekly unemployment insurance spiked by 69,000 to 375,000 for the week ended on Jan 26.

Economists had only expected claims to rise to around 320,000, but cautioned that the weekly report can be a volatile snapshot.

The morning's other news also appeared to confirm economic softening.

The government said personal spending rose 0.2 per cent in December while incomes increased 0.5 percent.

Both readings were stronger than expected, but consumer spending - a crucial economic motor - posted its weakest growth in 15 months in December, which is typically a frenzied shopping period.

Big retail stocks posted healthy gains.

Sears finished up 5.1 per cent at US$110.49 while Target was 5.8 per cent stronger at US$55.42 and Wal-Mart was up 3.2 per cent at US$50.77.

Bond prices strengthened as the yield on the 10-year US Treasury bond fell to 3.639 per cent from 3.733 per cent on Wednesday and that on the 30-year bond declined to 4.354 per cent against 4.433 per cent.

Bond yields and prices move in opposite directions. -- AFP

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