LONDON (ShareCast) - An offer by super-investor Warren Buffet to reinsure $800bn of municipal liabilities underwritten by bond insurers MBIA, Ambac Financial Group and FGIC sent the Dow-Jones and the S&P 500 shooting higher, though the tech-heavy NASDAQ Composite failed to participate in the advance.

The Dow-Jones 30 closed 133 points higher at 12,373 while the S&P 500 rose 9 points to 1,348. The NASDAQ Composite was unchanged at 2,320.

Buffet’s move to bolster investors’ confidence in municipal bonds had a galvanising effect on financial shares, with Moody’s, Countrywide Financial and Citigroup posting good gains, even though the offer has yet to be accepted by any of the bond insurers and has been rejected by one of them, Buffet said in an interview on CNBC.

MBIA and AMBAC were the two biggest fallers among S&P constituents on fears that they would be forced to share the profits from underwriting bonds with Buffet.

On the results front, Qwest was wanted after announcing an 89% gain in fourth-quarter earnings on the back of reduced labour costs. Brewer Molson Coors frothed higher as its Q4 profits exceeded expectations.

Insurer AIG recovered some of yesterday’s gains that were suffered after it had to take write-downs on its credit-default swap portfolio that were four times larger than originally announced. Sector peer Marsh McLennan also rose, even though it said poor performance from its risk and insurance business hit quarterly profit by 62%.

General Motors said it is making a new round of buyback offers to US hourly workers in order to cut costs. The company has reached an agreement with the United Auto Workers union on a buyout program to maximise savings from its new labour contract.

GM also reported that the fourth-quarter saw net losses of $722m compared with net income of $950m in the same period a year earlier.

Drugmaker Schering Plough posted a loss of $3.4bn in the fourth quarter due to its purchase of Organon BioSciences.

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