By Ellis Mnyandu
NEW YORK (Reuters) - U.S. stocks rose on Wednesday, capping the S&P 500's longest winning streak since November, as financial stocks soared on optimism the Obama administration was making progress on a plan to relieve banks of money-losing assets.
Stocks initially added gains following the Federal Reserve's statement that it is prepared to buy long-term U.S. government debt, but the boost faded upon the realization that the Fed's purchases won't be made any time soon.
Financial stocks stood out, with JPMorgan
The S&P financial index <.GSPF> rose 13 percent on reports that plans were advancing to create a "bad bank" that would mop up assets whose worth has plummeted, and in turn help revive lending to consumers and businesses.
"What moved the market earlier in the day is the bad bank concept gaining more acceptance," said Eric Kuby, chief investment officer at NorthStar Investment Management Corp in Chicago. "I don't think there are any big shockers from the Fed's statement."
The Dow Jones industrial average <.DJI> finished up 200.72 points, or 2.46 percent, at 8,375.45. The Standard & Poor's 500 Index <.SPX> climbed 28.38 points, or 3.36 percent, to 874.09. The Nasdaq Composite Index <.IXIC> ended up 53.44 points, or 3.55 percent, at 1,558.34.
STARBUCKS (SBUX.NQ)LOSES FROTH
But after the bell, companies including Starbucks Corp
In other news after the market's close, Qualcomm Inc
S&P'S REBOUND
With Wednesday's advance, the benchmark S&P 500 capped its fourth straight day of gains, its longest run-up in two months.
Worries about the financial sector's health have been the biggest hurdle for the market, fueling unease about stocks' performance in January, which is traditionally seen as a guide to the year's prospects.
On recent bets that the government will save the day, the indexes have swiftly erased most of their year-to-date losses.
Year to date, the benchmark S&P 500 is now down 3.2 percent, a marked improvement from a 6.4 percent loss seen at Tuesday's close. After starting 2009 up more than 20 percent from its November 21 bear market low, the S&P is up 16.2 percent from that significant low.
BANKING ON WASHINGTON
Adding to confidence in banks, an industry source said Sheila Bair, the chairman of the Federal Deposit Insurance Corp, is floating the idea that the FDIC could manage the "bad bank.
JPMorgan shares rose $2.60, or 10.4 percent, to $27.66 on the New York Stock Exchange, while Bank of America finished at $7.39. The Financial Select Sector SPDR
The "bad bank" option had an effect on the market beyond financials as a loosening up of lending would drive both consumer and business spending, and motivate investors.
Technology shares jumped, led by such bellwethers as iPhone maker Apple Inc
Internet media company Yahoo Inc
Following its two-day policy meeting, the U.S. Federal Reserve also signaled in its statement some concern that deflation risks were rising. The central bank's policy-setting panel held its fed funds target range for overnight interest rates at zero to 0.25 percent -- the level reached in December.
Volume was active on the New York Stock Exchange, where about 1.55 billion shares changed hands, above last year's estimated daily average volume of 1.49 billion shares, while on the Nasdaq, about 2.17 billion shares traded, below last year's daily average of 2.28 billion.
Advancers outnumbered decliners on the NYSE by a ratio of more than 6 to 1, while on the Nasdaq, about seven stocks rose for every two that fell.
(Additional reporting Deepa Seetharaman; Editing by Jan Paschal)
