* Financials lead market higher on housing rescue

* Oil extends slide, adds to positive tone

* Fannie Mae and Freddie Mac among standouts

* Dow up 0.6 pct, S&P 500 up 0.8 pct, Nasdaq up 1.6 pct (Updates to midmorning)

By Ellis Mnyandu

NEW YORK, July 23 (Reuters) - U.S. stocks rose on Wednesday, led by financial shares, including Freddie Mac (FRE.N: Quote, Profile, Research) and Fannie Mae (FNM.N: Quote, Profile, Research), on hopes Washington will come through with a rescue for the housing market.

Oil prices, which are down $20 from their peak, extended their decline, adding to the positive tone and easing concerns about inflation and economic growth.

The House prepared to vote on a measure that will help the housing sector recover from its worst downturn since the Great Depression in the 1930s. The White House said President George W. Bush will sign the bill into law.

Shares of Freddie Mac jumped more 15 percent, while Fannie Mae climbed more than 20 percent. Under the pending bill, the two largest providers of housing finance would get an emergency financial lifeline from the government.