Wall Street rises on oil drop, housing plan optimism

By Kristina Cooke

NEW YORK (Reuters) - Stocks rose on Wednesday as financial shares climbed on optimism about a rescue plan for mortgage finance companies Fannie Mae and Freddie Mac and as the price of oil fell.

Financial shares rose after President George W. Bush dropped a threat to veto a housing rescue bill, clearing the way for measures aimed at stabilizing the battered housing market, which has been the source of huge losses for financial companies.

Removal of the presidential veto threat spurred investors to snap up shares of Fannie and Freddie, the top two U.S. housing finance companies, which would receive an emergency government lifeline under the bill.

After the closing bell, the U.S. House of Representatives approved the housing market rescue legislation. The bill will now go to the Senate.

Oil prices fell more than $4 after government data showed a big increase in U.S. inventories of gasoline, boosting companies sensitive to higher fuel costs, such as retailers and airlines.

"We're getting some positive spin from the lower oil price and also from the comments from the legislature on Fannie and Freddie," said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale, Illinois.

"And while earnings in general have been poor, investors are still welcoming these results. It's the analogy that if I was expecting you'd get a 'D' in math and you got a 'C,' I'd be pleased -- even though it's still only a 'C'."

The Dow Jones industrial average rose 29.88 points, or 0.26 percent, to 11,632.38, while the Standard & Poor's 500 Index gained 5.11 points, or 0.40 percent, to 1,282.11, a three-week closing high. The Nasdaq Composite Index was up 21.92 points, or 0.95 percent, at 2,325.88.