Wall St climbs on Bush mortgage plan optimism

NEW YORK, Aug 31 (Reuters) U.S. stocks rose on Friday on optimism a plan by President Bush to help struggling subprime mortgage borrowers avoid foreclosure would help loosen credit conditions that have rattled financial markets.

But shares were off their highs as Bush also warned it was not the government's job to bail out speculators in the housing and credit markets.

His comments echoed those of Federal Reserve Chairman Ben Bernanke, who said the central bank did not intend to rescue lenders and investors who made bad decisions. Bernanke, speaking earlier in Jackson Hole, Wyoming, also gave no clear clues about when the Fed may cut interest rates.

Shares of financial services companies rose, including Citigroup, the largest U.S. bank, which climbed 1.2 percent to .81. Energy companies gained, spurred by a rise in crude oil prices.

''Markets are up in the near term based on expectations of a fiscal and a monetary floor for the credit concerns,'' said Michael Darda, chief economist at MKM Partners LLC in Greenwich, Connecticut.

''You have an equity market in a severely undervalued condition,'' he said, adding that the help to subprime borrowers would boost investor optimism.

The Dow Jones industrial average was up 96.49 points, or 0.73 percent, at 13,335.22. The Standard&Poor's 500 Index was up 11.57 points, or 0.79 per cent, at 1,469.21. The Nasdaq Composite Index was up 18.88 points, or 0.74 per cent, at 2,584.18.

Data suggesting continued strength in the economy lent support. A report showed new orders at U.S. factories jumped by a much bigger-than-expected rise in July and included robust export growth.

Among other bank shares, JPMorgan Chase was up 0.9 per cent at .36 and Bank of America Corp, the No. 2 US bank, advanced 1.5 per cent to .95. Both stocks had earlier risen by as much as 2 per cent. Financials, along with the home builders, are among shares that have suffered most in the credit market turmoil.

The Dow Jones home builder index .D cut gains after Bush's remarks, from a rise of nearly 5 percent earlier to up just 0.6 percent.

REUTERS RS RAI2207