Stem cell stocks rose Monday after researchers said they found stem cells in the amniotic fluid that cushions fetuses in pregnant women.

The news sent some highly speculative stem cell stocks higher. Some investors were betting the finding shows how scientists can steer clear of controversy over the destruction of embryos in medical research.

Among stem cell stocks moving higher Monday were Osiris Therapeutics ( OSIR), gaining 4.9% to $25.56; Aastrom Biosciences ( ASTM), up 8.3% to $1.57; ViaCell ( VIAC), rising 9.7% to $5.56; and StemCells ( STEM), 5.4% higher to $3.50.

"The amniotic stem cell findings are promising, but it's still early stage," says Jose Haresco, analyst at investment research firm Merriman Curhan Ford.

According to research published in a recent issue of the journal Nature Biotechnology, amniotic fluid contains a number of different cell types that can develop in the same way embryonic cells can. Researchers prize stem cells for their ability to develop into the building blocks of all kinds of tissue -- a trait that they believe could lend itself to fighting disease.

Amniotic fluid is extracted from the protective sac that surrounds the fetus, not from the fetus itself. The Bush administration has restricted federal funding for embryonic stem cell work since 2001.

"Democrats taking back at least part of the government has created a positive trading environment for these stocks," Haresco says, referring to Democratic gains in Congress in the most recent elections.

But the research is preliminary. Researchers have yet to prove that stem cells can effectively and reliably treat diseases and wounds in humans.

"Institutional investors want something to hang their hat on," Haresco says. "Retail investors trade the stocks off of what happens in the news."

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