Market maintains forward momentum

NEW YORK » Wall Street advanced for a second straight session yesterday as investors placed bets that the Federal Reserve won't indicate that it's leaning toward an interest rate hike.

Market watchers are anticipating that the Fed on Wednesday will leave rates on hold and say that economic growth is cooling while inflation remains a concern. The central bank has maintained this general stance for several months now, suggesting that rates are staying put.

"What is likely is no change at all. We might get a little commentary on the housing market nationwide ... but we don't think there's much action in the cards," said Jim Russell, director of core equity strategy for Fifth-Third Asset Management in Cincinnati.

Worries over the flagging housing market, particularly the subprime mortgage industry, have been dragging down stocks over the past month. But investors got some reassurance yesterday from a U.S. Commerce Department report that construction of new homes rose by 9 percent in February to a seasonally adjusted annual rate of 1.525 million units, higher than the expected 1.450 million.

The data wasn't all positive -- applications for building permits dropped -- but not at all suggestive that the sector is collapsing.

Stocks were also boosted by a fresh slate of takeover activity, notably a $5.93 billion offer to take Affiliated Computer Services Inc. private.

The Dow Jones industrial average rose 61.93, or 0.51 percent, to 12,288.10, for a two-day advance of 177.69. This was the Dow's best two-day gain since Feb. 13-14.

Broader stock indicators gained as well. The Standard & Poor's 500 index advanced 8.88, or 0.63 percent, to 1,410.94, and the Nasdaq composite index added 13.80, or 0.58 percent, to 2,408.21.

Bonds also rose, as the Treasury markets shrugged off the housing data and an announcement from China that the country doesn't intend to build up its reserves. The yield on the benchmark 10-year Treasury note fell to 4.55 percent from 4.57 percent late Monday.

Gold prices rose. The dollar was little changed against the euro, but slipped versus the yen.

Crude futures rose 14 cents to $56.73 a barrel on the New York Mercantile Exchange. Gasoline futures briefly leaped to a six-month high due to refinery problems, but then retreated ahead of U.S. inventory data today.

The Russell 2000 index of smaller companies was up 6.55, or 0.83 percent, at 793.60.

Concerns about subprime lenders, who make loans to people with poor credit ratings, continue to dog the markets. People's Choice Finan- cial Corp., which operates a subprime mortgage unit, filed yesterday for Chapter 11 bankruptcy protection, and Fannie Mae said it will no longer allow New Century Financial Corp. to sell mortgage loans to the U.S. government-sponsored company.

A bright spot in the sector, however, was news that subprime mortgage lender Accredited Home Lenders Holding Co. received a commitment for a $200 million term loan from Farallon Capital Management LLC, a San Francisco-based money manager.

Accredited Home rose $1.82, or 20.3 percent, to $10.77.