Stocks closed sharply higher on hopes that a government plan to stem home foreclosures would help ease the housing slump's drag on the economy and underpin profit growth.
Shares of home builders, financial services companies and other housing-related companies soared after President Bush unveiled a plan that would freeze interest-rate increases on adjustable-rate subprime mortgages for five years.
The Dow Jones U.S. home construction index advanced 11.9 percent -- its biggest one-day advance in at least two years.
Shares of energy companies, including Exxon Mobil , helped buoy the Dow and the S&P 500, driven higher by a resurgence in crude oil prices back above $90 a barrel.
Speaking from the White House, Bush said an estimated 1.2 million homeowners could be eligible for mortgage assistance.
"A lot of people feel that maybe the government is a separate entity from the financial institutions so they actually can help," said Cleveland Rueckert, market analyst at
Birinyi Associates Inc in Stamford, Connecticut.
Countrywide Financial, the largest U.S. mortgage lender, and Fannie Mae , the nation's biggest source of mortgage finance, were among the session's advancers.
Shares of American International Group , the world's largest insurer by market value, led the major gainers in the Dow and the S&P 500, a day after it said its exposure to the housing and credit crisis was manageable.
Among banks, shares of JPMorgan Chase, the No. 3 U.S. bank, gained 2.6 percent.
Builders also got a boost from Toll Brothers after the largest U.S. luxury home builder reported a smaller-than-expected loss. Shares of home builder Lennar, the No. 2 U.S. home builder, jumped 14.2 percent.
On the Nasdaq, shares of Apple led gainers, with a rise of 2 percent after two brokerages raised their price targets for the iPod maker's stock.
Target said Thursday that if recent soft sales trends continued, its December same-store sales would fall short of its previous forecast. Earnings were mixed elsewhere in retail, though several companies reversed earlier losses and were on the plus side in afternoon trading.
Motorola also was among stocks helping to move the market, as the cellular phone company said a breakup remains on the table. At the same time, the company reaffirmed its fourth-quarter earnings forecast, sending shares up.
Among the biggest gainers of the day were the Nasdaq's Hoku Scientific , which surged after getting $185 million in financing from Merrill Lynch. On the losing side, electronic payment solutions firm Verifone shares continued to take a beating after Moody's placed it on notice for a possible downgrade. The company's stock has lost more than half its value since Nov. 30.
Elsewhere, MBIA, the largest bond insurer in the world, said Thursday it is looking at ways to shore up its capital base, a day after rating agency Moody's Investors Service said the insurer was "somewhat likely" to require additional capital.
And Delta Financial was the latest casualty of the subprime collapse, as the lightly traded lender announced it probably will have to file bankruptcy. The Long Island, N.Y.-based company earlier had fired most of its 1,395 employees, and shares lost almost all their value Thursday.