Fannie Mae and Freddie Mac -- the two large U.S. housing finance firms -- were among the biggest gainers as investors speculated they may benefit from a Bush plan to help homeowners struggling to meet mortgage payments. "Bush going out of his way to speak about the stock exchange may be seen as a sign that complete care is being spent at the highest levels," said Peter Jankovskis, chief investment officer at OakBrook Investments LLC in Lisle, Illinois. "People are genuinely thinking that this is a central focus and that someone is minding the store."

The Dow Jones industrial average was up 162.74 points, or 1.23 percent, at 13,401.47. The Standard & Poor's 500 Index was up 18.89 points, or 1.30 percent, at 1,476.53. The Nasdaq Composite Index was up 29.37 points, or 1.14 percent, at 2,594.67. Bush's proposal to deal with the mortgage crisis, sparked by rising defaults on risky subprime loans, reassured markets that have been battered by credit turmoil.

Some analysts have warned the complications could lead to a recession. Bernanke told a conference in Jackson Hole, Wyoming, that the U.S. central bank will take the necessary steps to shelter the economy from turmoil in markets -- though he added the Fed will not bail out investors who made bad decisions. Bush strongly encouraged lenders to work with homeowners to renegotiate loan terms and called on Congress to basically pass legislation to modernize the Federal Housing Administration, which provides mortgage insurance to borrowers through private sector lenders.

But the president also said it was not the government's job to bail out "speculators," a remark that briefly caused stocks to pare gains. Fannie Mae's shares increased 3.7 percent to $65.75, while Freddie Mac gained 4.9 percent to $63.03 on renewed hopes they will have a bigger role helping borrowers. Economic data took a back seat, as Bush and Bernanke dominated the market's direction. Reports on Friday reflected inflation under control in July while U.S. factories were busier than forecast, portraying an expanding economy. But other data showed U.S. consumer sentiment worsened in August from July, while the outlook for economic growth weakened.

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