Wall St. Cheers New JPMorgan-Bear Deal

Bond prices fell sharply. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.50 percent from 3.34 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 46 cents to $101.38 per barrel on the New York Mercantile Exchange.

The housing sector, which has offered a steady drumbeat of mostly negative news in recent months, gave investors a welcome lift. The National Association of Realtors said sales of existing homes rose by 2.9 percent in February to a seasonally adjusted annual rate of 5.03 million units. It was the biggest increase in a year and Wall Street had expected a slight decline. Still, the median home price fell by the largest amount on record.

Smith said further readings on the housing sector, including a report on home prices due Tuesday, could help determine whether Wall Street's enthusiasm will continue or prove short-lived. Further weakness in housing, he said, could mean banks will continue to struggle with a locked-up credit market.

Still, the Fed's move to broker the Bear Stearns buyout has allowed investors the sense that not all the debt guaranteed by mortgages is "nuclear waste." It will be some time before Wall Street knows whether the write-downs on mortgages already taken will be sufficient.

"The fact that the Fed is willing to come in and buy it at some level makes people think 'OK, it's not zero,'" Smith said, referring to the troubled debt.

Beyond housing, a report from Tiffany & Co. helped assuage some concerns about the health of high-end consumers. The jeweler said loans it made to a diamond company weighed on its fourth-quarter profit, but that earnings excluding items were in line with Wall Street's expectations. Tiffany jumped $4.76, or 12 percent, to $43.36.

Walgreen Co. rose $1.98, or 5.4 percent, to $38.76 after the drugstore chain said its second-quarter earnings rose 5 percent as it controlled expenses to offset slower sales growth.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where volume came to 675.3 million shares.

Overseas, Japan's Nikkei stock average closed down 0.02 percent. Markets in Europe and in Hong Kong were closed for Easter Monday.