Feb. 25 (Bloomberg) -- U.S. stocks staged their biggest rally this month after Standard & Poor's kept AAA debt ratings for the nation's largest bond insurers, easing concern credit losses will extend the worst earnings slump since 2001.

MBIA Inc. and Ambac Financial Group Inc., which rely on their top credit scores to guarantee $1.2 trillion in bonds, led gains in the S&P 500 Index and helped banks and insurers rebound from earlier losses. Exxon Mobil Corp. climbed the most in a month after natural gas prices advanced to a two-year high. Genentech Inc. posted its steepest gain in three years on federal approval to market Avastin for breast cancer.

The S&P 500 advanced 18.69 points, or 1.4 percent, to 1,371.8. The Dow Jones Industrial Average rose 189.2, or 1.5 percent, to 12,570.22. The Nasdaq Composite Index added 24.13, or 1.1 percent, to 2,327.48. Almost six stocks climbed for every one that fell on the New York Stock Exchange.

``People are breathing a sigh of relief and jumping back in again,'' said Peter Kovalski, who manages financial services stocks at Alpine Woods Capital Investors, which oversees $12 billion in Purchase, New York. ``All financials that would've been vulnerable to a meltdown in credit markets rebounded on this news.''

Financial companies in the S&P 500 lost money as a group in the fourth quarter and are projected to post profit declines through the first half of 2008, according to estimates compiled by Bloomberg. Their shares lost 6.4 percent this year, partly due to concern that insurance would lapse on bonds guaranteed by Ambac and MBIA.

MBIA, Ambac

MBIA climbed $2.40 to $14.58. Ambac rose $1.70 to $12.41. Financial shares in the S&P 500 gained 1.2 percent after earlier falling as much as 1.8 percent.

MBIA is no longer under review for a downgrade by Standard & Poor's, indicating the bond insurer is a step further away from losing its AAA insurance credit rating. Ambac, which ranks second to MBIA among bond insurers, is still being reviewed for a possible downgrade, S&P said.

``As long as the ratings are there, banks do not need to write down securities on their balance sheets that are guaranteed by Ambac and MBIA,'' said Anton Schutz, who manages $150 million at Mendon Capital Advisors in Rochester, New York.

Exxon, the largest U.S. oil company, added $1.96 to $89.13. Chevron Corp., the second-biggest, climbed $1.76 to $87.18. Natural gas increased as much as 2.3 percent to $9.36 per million British thermal units on forecasts for colder weather in the U.S. Midwest and Northeast.

Genentech, Boston Scientific

Genentech jumped $6.36 to $77.96. The biotechnology company may add more than $700 million in sales this year after the new approval for Avastin. Avastin generated $2.3 billion in U.S. sales in 2007. Switzerland's Roche Holding AG, Genentech's largest shareholder, markets Avastin outside the U.S.

Boston Scientific Corp. added 74 cents to $13.05. The company said the Food and Drug Administration approved the Confient implantable defibrillator, which helps protect people from cardiac arrest; the Livian defibrillator, which stabilizes erratic heartbeat; and the Latitude heart monitoring system.

Take-Two Interactive Software Inc. posted its biggest gain ever, rallying $9.53, or 55 percent, to $26.89, after Electronic Arts Inc. made a $2 billion takeover offer to acquire the maker of the top-selling ``Grand Theft Auto'' series of video games.

Take-Two rejected the cash offer of $26 a share on Feb. 22, prompting Electronic Arts to take its bid directly to investors yesterday. The offer is 64 percent higher than the Feb. 15 closing price, the last day of trading before it was made. Electronic Arts fell $2.60 to $47.14.

Sales of existing homes fell less than forecast last month, boosting shares of Lowe's Cos. and Home Depot Inc., the two biggest home-improvement retailers, and builders.

Lowe's climbed 91 cents to $24.50 even after reporting a decline in fourth-quarter profit and predicting several ``challenging'' quarters ahead. Home Depot, Lowe's bigger rival, added $1.05 to $28.82 for the second-biggest gain in the Dow average.

Home resales dropped 0.4 percent to an annual rate of 4.89 million, the lowest since the National Association of Realtors began tracking them in 1999. The median forecast of economists polled by Bloomberg was for a pace of 4.80 million.

Meritage Homes Corp., the builder that sells most of its homes in Texas, Arizona and California, climbed $1.43 to $16.50.

Alcoa Inc. rose $2.30, or 6.3 percent, to $38.85 for the biggest gain in the Dow average. The world's third-largest aluminum producer may benefit as power disruptions in China and South Africa cut output of the metal and some Chinese producers lost electricity discounts, increasing costs.

Tiffany & Co. rose the most since August 2005, gaining $3.14 or 8.4 percent, to $40.46. Investors speculated that LVMH Moet Hennessy Louis Vuitton SA, the world's largest luxury-goods maker, may make a bid to buy the second-biggest luxury jewelry maker.

Qwest Communications International Inc. rose 33 cents, or 6.3 percent, to $5.60. The provider of local-phone service in 14 U.S. states will use cash to pay down debt and buy back shares, Chief Executive Officer Edward Mueller said at a meeting with analysts in New York.

Getty Images Inc. jumped the most since October 2001, gaining $7.22, or 30 percent, to $31.67. The largest provider of photographs to publications and ad agencies agreed to be bought by private equity firm Hellman & Friedman LLC for $34 a share in cash.

Banks Slump

Financial shares fell earlier in the day after Oppenheimer & Co. analyst Meredith Whitney's predicted that Citigroup Inc., the biggest U.S. bank, may post a second straight quarterly loss.

Citigroup fell the most in the Dow average, losing 38 cents to $24.74. The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Whitney wrote today in a note to clients. The shares may fall below $16 as Citigroup is forced to sell $100 billion of assets, the analyst predicted.

Whitney and colleague Kaimon Chung also cut their earnings estimates in a separate report on large U.S. East Coast banks by an average of 29 percent for 2008 and 13 percent for 2009.

Freddie Mac retreated 43 cents to $26.18 after Goldman downgraded the second-largest provider of money for U.S. home loans to ``sell'' from ``neutral.''

Goldman also lowered its recommendations for Fannie Mae and Washington Mutual Inc. to ``sell'' from ``neutral,'' citing potential credit losses for the mortgage lenders stemming from a ``severe'' housing market.

Fannie Mae fell 45 cents to $28.27. Washington Mutual added 17 cents to $17.07.

`Continued Challenges'

The reductions reflect ``continued challenges in the credit markets,'' Goldman analyst William Tanona wrote in a report dated today.

Merrill Lynch & Co., Lehman Brothers Holdings Inc., Morgan Stanley, Bear Stearns Cos. and JPMorgan Chase & Co. also had their 2008 profit estimates cut by Goldman.

Banks and brokerages in the S&P 500 tumbled 26 percent in the past year as global writedowns and credit losses stemming from the collapse of the subprime mortgage market climbed to $163 billion.

Record losses at banks and brokerages including Citigroup and Merrill Lynch & Co. have dragged earnings down by 17 percent on average for S&P 500 members that have reported fourth-quarter results so far, the biggest decline since the last three months of 2001.

The Russell 2000 Index, a benchmark for companies with a median market value of $533 million, gained 2.2 percent to 710.46. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 1.5 percent to 13,866.04. Based on its advance, the value of stocks increased by $254 billion.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: February 25, 2008 17:56 EST