Stocks recharge advance

NEW YORK (CNNMoney.com) -- Stocks gained early Tuesday afternoon as investors welcomed a strong report on housing starts. However, gains were limited by concerns about the Federal Reserve policy meeting, which will start later this afternoon.

The Nasdaq (up 15.43 to 2,409.84, Charts) composite added 0.6 percent three hours into the session, while the Dow Jones industrial average (up 54.72 to 12,280.89, Charts) and the broader S&P 500 (up 7.62 to 1,409.68, Charts) index both saw smaller gains.

After a choppy start Tuesday morning, stocks soon turned higher, regaining the momentum from Monday's session, in which all three major gauges rose around 1 percent in response to a rash of corporate deals.

Tuesday's advance was led by technology, transportation and commodity shares and sparked partly by the morning's housing report. Housing starts bounced back in Feb. after a big drop in Jan. Building permits, a measure of builder confidence, slipped more than expected. (Full story)

"We had a positive housing number this morning and the big overhang has been housing and how that could roil our profit and economic growth," said Jack Ablin, chief investment officer at Harris Private Bank. "Today's number probably added a little confidence to edgy investors."

However, the report is not likely to influence the central bankers, who are set to begin their two-day policy meeting later Tuesday, with a decision due Wednesday afternoon. The Fed is expected to hold interest rates steady at 5.25 percent for the sixth meeting in a row.

As always, investors will be attuned to what the statement says about the outlook for economy and interest rates. (Full story)

Accredited Home Lenders (up $1.92 to $10.87, Charts) jumped 26 percent on news that it has received a $200 million loan. The subprime mortgage lender has seen its stock battered over the past few weeks as it has struggled to raise money, with many of its partners cutting the company off because of the fallout in the sector.

Subprime mortgage companies - lenders to customers with weak credit - have been suffering lately as more people have defaulted on loans thanks to the decline in the housing market and the impact of higher interest rates.

Other subprime stocks jumped, too, including Fremont General (up $0.67 to $8.74, Charts) and NovaStar Financial (up $0.51 to $5.94, Charts).

Palm (up $0.85 to $18.99, Charts) gained 4 percent in active Nasdaq trade on reports that a sale of the device maker could be announced as soon as Thursday, when the company is due to report earnings.

Affiliated Computer Service (up $8.62 to $59.91, Charts) is being taken private by a group that includes the company's founder. The deal is worth $8.2 billion in cash and debt. Shares jumped 17 percent.

Dutch bank ABN AMRO (down $0.16 to $41.20, Charts) is in exclusive talks with rival Barclays (up $1.94 to $55.29, Charts) to be acquired for $80 billion, the two banks have confirmed.

ABN shares slipped, and Barclays shares jumped.

SanDisk (up $1.97 to $41.96, Charts) added 4 percent on a CIBC World Markets upgrade, Briefing.com reported.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than 2 to 1 on volume of 640 million shares. On the Nasdaq, advancers topped decliners 9 to 5 on volume of 860 million shares.

U.S. light crude oil for April delivery rose 11 cents to $56.70 a barrel in volatile trading on the New York Mercantile Exchange.

COMEX gold for April delivery added $6.30 to $660.60 an ounce.

Treasury prices rose, lowering the yield on the 10-year note to about 4.54 percent from 4.56 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar inched higher versus the euro and fell versus the yen.

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