US STOCKS-Market up on Buffett's bond insurer plan

(Updates to late morning)

By Kristina Cooke

NEW YORK, Feb 12 (Reuters) - U.S. stocks rose on Tuesday as optimism about billionaire Warren Buffett's offer to the three top bond insurers to take on $800 billion in municipal bond risk lifted financial companies.

Positive earnings news from agricultural company Monsanto and drug maker Schering-Plough added to the market's positive mood and helped extend Monday's rebound from the previous week's steep losses.

Buffett's move allayed fears that rating downgrades would force investors to sell billions of dollars in bonds issued by cities and states. That sent the S&P financials index up 1.9 percent, led by a 2.9 percent gain in shares of Citigroup Inc (C.N: Quote, Profile, Research).

"The market seemed to like the Buffett news and with the lack of any more bad news, that's given us a bit of a lift," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"But there is some suspicion about how long this optimism will last, so you're not seeing a rush to buy."

The Dow Jones industrial average .DJI was up 210.54 points, or 1.72 percent, at 12,450.55. The Standard & Poor's 500 Index .SPX was up 20.52 points, or 1.53 percent, at 1,359.65. The Nasdaq Composite Index .IXIC was up 26.26 points, or 1.13 percent, at 2,346.32.

One of the struggling bond insurance companies has rebuffed the plan while the other two have yet to respond to Buffett, who is chairman and CEO of Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research).