FED TO THE RESCUE

"Unless and until the economic clouds part, we'll likely see the housing market continue to struggle," Mike Larson, analyst at Weiss Research, said of the National Association of Realtors' measure of pending-home sales, which fell 4.7% in May. Read Economic Report .

Ahead of the opening bell, stock-index futures had trimmed their losses as Bernanke said that the Federal Reserve might extend the time frame for embattled brokerages to tap the central bank for emergency funds. Read The Fed.

The Fed move offered assurances that "there is little risk of actual bankruptcy for the [financial] sector," said Ali.

Worries that Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) may have to raise more capital, along with a report that Lehman Brothers Holdings Inc. (NYSE:LEH - News) was temporarily barred from trading oil contracts reignited financial-sector worries ahead of second-quarter earnings season, prompting stocks to slide on Monday.

On Tuesday, shares of Fannie and Freddie gained some ground with comments by analysts and regulators easing worries the big mortgage buyers might have to return to the capital markets due to pending accounting-rule changes.

Adding his voice to the mix, Richmond Fed President Jeffrey Lacker said the Federal Reserve shouldn't wait too long before raising interest rates.

OK OK I am wondering like you are wondering, can I ride this rally, is the summer rally begun?

You could buy some SPX longs using the ETF'S and use tight stops, or maybe concentrate on getting rid what is weak in your portfolio, of course get your financial advisor to assist, but I dont think we have hit THE BOTTOM, so I am remaining patient for the supper, not worried about the snack.

Today buyers rushed in at a 72% or so up volume pace, we are absent the selling panic I like to see. I do not expect corporate earning to be there to support current valuations.

I am snooping some things, and may NIBBLE on some beaten down stuff, the REFINERS have been killed.....I dont like financials to hold (though maybe a pop can be played here) as I think most will dilute current investor value.

I thought refiners would do better today as oil prices declined. SNDK is usually a good LONG TERM BUY at these levels down the road....

BUT the credit debt issues have not been culled out yet, and I dont think in the stocks yet.....and the VIX hasn't shown enough fear for a bottom, buying has not reversed Bear signal.

Below is AP story on HOusing, where isour economy going w/o housing healing?

Housing market slump seen stretching furtherTuesday July 8, 4:37 pm ET By Alan Zibel, AP Business Writer
Realtors' pending home sales report shows housing slump continues, could drag on another year
WASHINGTON (AP) -- Signs are emerging that the U.S. housing market's long slump is likely to fester through the summer, and the real estate market may not recover for at least another year.
The latest report, the National Association of Realtors' pending home sales index, slipped by 4.7 percent in May to the third-lowest reading on record. The decline "suggests we are not out of the woods by any means," said the trade group's chief economist Lawrence Yun.
The bad news came as the regulator for Fannie Mae and Freddie Mac tried to reassure investors that an accounting rule change wouldn't force the government-chartered mortgage finance companies to raise tens of billions in capital to offset losses.
With more negative data about the housing market continuing to emerge as the economy weakens and job losses accelerate, economists are reluctant to say the worst is over.
"Even if housing market activity does manage to bottom out later this year, it is likely that any recovery would be exceedingly slow," Jeffrey Lacker, president of the Federal Reserve Bank of Richmond said in a speech in Washington.
While home sales are likely to fall to their lowest point late this year or early next year, any recovery is likely to be weak through at least 2010, said Mark Vitner, senior economist with Wachovia Corp.
Meanwhile, prices shouldn't hit bottom for another year at the earliest, Vitner said, since the housing market is glutted with unsold new homes and foreclosed properties.
Making matters worse, rates on 30-year mortgages have been above 6 percent since late May, leading to a steep decline in new applications.
The Realtors' seasonally adjusted index of pending sales for existing homes fell 4.7 percent to 84.7 from an upwardly revised April reading of 88.9. The index was 14 percent below year-ago levels. Sales are considered pending when the seller has accepted an offer, but the deal has not yet closed.
Wall Street economists surveyed by Thomson/IFR had predicted the index would come in at 87. The index, which sunk to a record low of 83 in March, stood at 98.5 in May 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started.
Pending sales fell around the U.S., sinking the most in the South, and the least in the West.
Despite the negative numbers, "the worst of the hemorrhaging is behind us" and a modest recovery is likely to take shape next year, said Bernard Baumohl, managing director of the Economic Outlook Group.
Homeowners shouldn't get too excited, though, as Baumohl predicts median prices will show year-over-year gains of no more than 6 percent by next year.
By the Realtors' measurement, prices nationwide were down 6.3 percent in May, but are falling faster in big cities. The Standard & Poor's/Case-Shiller home price index of 20 cities fell by 15.3 percent in April compared with a year ago, dropping prices to their lowest levels since August 2004.
Meantime, shares of mortgage financiers Fannie Mae and Freddie Mac stabilized Tuesday, a day after plunging to early-1990s levels on worries they might need billions of dollars in new capital if a new accounting rule is put into effect.
Fannie Mae shares rose $1.88, or 11.9 percent, to $17.62 Tuesday, a day after plunging more than 16 percent. Freddie Mac shares rose $1.55, or 13 percent, to $13.46 after sliding nearly 18 percent Monday.
The federal regulator for the two companies, Office of Federal Housing Enterprise Oversight Director James Lockhart, said in a CNBC interview the accounting changes "would really have no impact on the risk of these firms." It would "make no sense" to mandate extra capital due to accounting changes, he said.
While the government is widely expected to stand behind Fannie and Freddie's debt should the companies be unable to meet their obligations, shareholders' interests are not protected.
"The shareholders are the ones who are at huge risk here ... they could potentially get wiped out," said Nigel Gault, chief U.S. economist at Global Insight.
Highlighting those risks, shares of mortgage lender IndyMac Bancorp Inc. plummeted to an all-time low of 34 cents Tuesday morning before recovering slightly, a day after the mortgage lender said it halted accepting new loan submissions in its main mortgage lending divisions and plans to slash more than half its work force.
As the housing market and broader economy continue to sag, Senate lawmakers appeared on track to approve -- possibly by week's end --a rescue plan designed to save hundreds of thousands of homeowners from foreclosure.
But it was still uncertain whether lawmakers would reach a deal with the White House, which is balking at key portions of the bill, particularly $3.9 billion included for buying and fixing up foreclosed properties. Democrats argue the money is key to preventing neighborhood blight, but most Republicans call it a bailout for lenders who helped cause the mortgage mess.
Speaking Tuesday to a mortgage-lending forum in Arlington, Va., Treasury Secretary Henry Paulson emphasized the limits of what the government can do to help.
"Many of today's unusually high number of foreclosures are not preventable," Paulson said. "There is little public policymakers can, or should, do to compensate for untenable financial decisions."
AP Business Writer Stephen Bernard in New York contributed to this report.