U.S. STOCKS - Market up on WaMu optimism, easing credit fears

By Cal Mankowski

NEW YORK (Reuters) - U.S. stocks jumped on Monday as news that Washington Mutual Inc, the largest U.S. savings and loan company, is close to securing a $5 billion cash infusion bolstered hopes that the credit crisis is easing, driving up financial shares.

Shares of WaMu, one of the largest U.S. mortgage lenders, surged by more than one third, while the S&P financial index rose 2.52 percent.

Washington Mutual is close to obtaining $5 billion from U.S. private equity firm TPG and other investors, people familiar with the situation said on Monday. An investment would ease the thrift's need for capital as losses from subprime mortgages and other loans soar.

"I think it's another manifestation of the defrosting of the credit freeze and the money the Fed is pumping into the system eventually finding its way to where it is intended to benefit, and that's the financial area," said Ned Riley, chief executive of Riley Asset Management in Marshfield, Massachusetts.

The Dow Jones industrial average rose 83.86 points, or 0.67 percent, to 12,693.28. The Standard & Poor's 500 Index gained 11.44 points, or 0.83 percent, to 1,381.84 and the Nasdaq Composite Index climbed 12.88 points, or 0.54 percent, to 2,383.86.

A rise in energy shares as the price of crude oil gained also buoyed markets. Shares of Exxon Mobil Corp rose 1.3 percent to $89.90 and Chevron rose 1.4 percent to $89.28.

"Energy stocks are moving in concert with the price of oil, which defies logic, common sense and the laws of gravity when one looks at the surplus inventory in crude and gasoline worldwide and the lack of economic growth," Riley said.

Shares of Citigroup Inc rose 4 percent to $25.06 after agreeing to sell its Diners Club International operations for $165 million to Discover Financial Services. Financials were also higher in Europe after Merrill Lynch raised Swiss bank UBS to a "buy."