NEW YORK (AP) – Wall Street finished sharply higher Tuesday as oil prices dropped sharply for the second straight day and investors were encouraged by the possibility of more help for the ailing financial system. The Dow Jones industrials gained more than 150 points, and all the major indexes were up more than 1 percent.

Crude prices tumbled, falling $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange, bringing oil’s two-day drop to more than $9. The average U.S. retail price of a gallon of gasoline remains at a record $4.108, according to AAA auto club, the Oil Price Information Service and Wright Express.

Speeches by Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and JPMorgan Chase & Co. Chief Executive Jamie Dimon gave the market some reassurance about the financial sector.

Investors have been concerned this week about the health of government-backed lenders Fannie Mae and Freddie Mac; the two companies’ troubles helped send prices lower on Monday, but they also helped lead the rebound Tuesday.

The market was relieved to hear Bernanke say in a speech the central bank might extend its lending efforts to investment banks; the Fed began allowing the big companies to borrow after the near-collapse of Bear Stearns Cos. earlier this year. At the Federal Deposit Insurance Corp.’s forum on mortgage lending, where Bernanke spoke, Dimon said “the future is very, very bright,” but that “I do think we have some very serious issues to face.”

Paulson, meanwhile, made an upbeat assessment of the government’s efforts to prevent the volume of mortgage foreclosures that touched off the credit crisis last year, although he also said he expects foreclosures to continue.

The Treasury secretary also said he was pleased at steps taken by Freddie Mac and Fannie Mae to raise money: “Fresh capital will strengthen their balance sheets and allow them to provide additional mortgage capital, as they balance their responsibilities to their mission and to their shareholders.”

All that helped stocks stage a late-afternoon rebound after choppy trading throughout most of the session.

“A lot of money is flowing into the previous laggards,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, pointing to financials, health, and housing stocks. “It really seems like an oversold bounce.”

According to preliminary calculations, the Dow rose 152.25, or 1.36 percent, to 11,383.21, after moving in and out of positive territory.

Broader stock indicators rose as well. The Standard & Poor’s 500 index rose 21.39, or 1.71 percent, to 1,273.70, while the Nasdaq composite index rose 51.10, or 2.28 percent, to 2,294.42.

Bond prices edged higher Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 3.91 percent late Monday.

The dollar rose against other major currencies, while gold prices fell.

Concerns about the housing market had weighed on investors the past few sessions. On Tuesday, the National Association of Realtors said Tuesday that pending sales of U.S. homes fell by 4.7 percent in May from the previous month. The worsening housing market not only stifles consumer spending, but also hurts the chances of a recovery at the banks that make loans and are invested in risky mortgage debt.

But by afternoon, the market’s mood was lifting.

Shares of Fannie Mae rose $1.62, or 10.3 percent, to $17.39; and Freddie Mac jumped $1.18, or 9.9 percent, to $13.09. Both mortgage lenders would need capital if a new accounting rule is enacted that would force them to put investments used as a main revenue driver off their balance sheets.

“There was just a little light today that things might be better, a real relief bounce,” said Ryan Larson, senior equity trader at Voyageur Asset Management. “Things have been beaten up so bad the past couple of weeks that investors are finding a little bit of value down here.”

Anemic economic conditions led Office Depot Inc. to forecast a nearly 10 percent drop in quarterly sales at the office supplies retailer’s North American stores that have been open at least a year. Office Depot shares fell $3.29, or 31 percent, to $7.12.

EMC Corp., tumbled $1.75, or 11.5 percent, to $13.39. The company is the majority owner of VMware, whose co-founder and CEO is leaving the company.

The Russell 2000 index of smaller companies rose 24.46, or 3.72 percent, to 682.72.

Advancing issues outnumbered decliners by a 2 to 1 basis on the New York Stock Exchange, where volume came to 1.73 billion shares.

Stock markets overseas slid Tuesday before Wall Street’s turnaround. Japan’s Nikkei stock average finished down 2.45 percent, Britain’s FTSE 100 fell 1.31 percent, Germany’s DAX index fell 1.43 percent and France’s CAC-40 fell 1.54 percent.


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