Stocks rocketed higher Monday as investors cheered details of the government plan to mop up toxic assets from banks' balance sheets.
The Dow Jones Industrial Average soared 497.48, or 6.8 percent, to close at 7775.86. The S&P 500 jumped 7.1 percent and the Nasdaqgained 6.8 percent.
It was the first time since mid-November that all three major indexes finished up more than 6 percent.
Today's rally came after a rocky week last week, marked by outrage over the AIG bonuses and the Fed's surprise announcement to buy U.S. debt, that left the Dow up just 0.75 percent for the week.
The government is planning to loan private firms money to buy up to $1 trillion of bad assets, then share in the profit or loss when they are sold at a later date. The plan is two-pronged: One part will focus on purchasing toxic securities, the other on purchasing bad loans.
While some say that the government's proposal would actually make things worse for the economy, futures traders greeted anticipation of the announcement with enthusiasm.
"You cannot fight this intervention," Steve Grasso, of Stuart Frankel, told CNBC. "When you start to see the market just climb after weeks and months of being sold out, you have to participate."
Shares in financial companies benefited the most, with Bank of America and Citigroup jumping 26 percent and 20 percent, respectively.
Goldman Sachs popped 15 percent following a report that the bank might pay back the TARP moneyit received by selling part of its stake in Chinese bank ICBC.
American Express, which had been under pressure since warning that credit-card defaults were likely to rise this year, shot up 19 percent.
The Select Sector SPDR Financial exchange-traded fund that tracks the top companies in the sector gained more than 16 percent.
Also giving the market a boost was a better-than-expected housing report: Existing-home sales rose 5.1 percentto an annual pace of 4.72 million, blowing past the forecast for a 4.45 million rate.
Pushing stocks even higher was news that there wil be at least a one-week delay in the House debate on special taxes for AIG bonuses.
Stocks in Europe and Asia finished at their highest levels in more than a month, led by banks, as investors around the globe cheered the U.S. toxic-asset plan.
Despite the fall of the US dollar after the Federal Reserve's announcement that it will boost the money supply by buying Treasurys, China is still keen to buy US government bonds, viewing the credit risk as low overall, a senior Chinese central bank official said.
"Investing in American Treasurys, as an important part of our foreign exchange reserve management, will continue," Hu Xiaolian, a vice governor of the People's Bank of China, told a news conference.
Elsewhere, General Motors shares gained even as bondholders expressed concern over delays in the company's restructuring program.
And in tech land, Intel announced it will keep base salaries and annual incentive cash baselines flat for its listed officers for 2009.
The company sees significant cost savings in 2009 from compensation program reductions, including no salary hikes, cut in contributions to retirement savings plans and employee stock purchase programa, Intel said in a filing with the SEC. Shares gained 3 percent in premarket trading.
Tiffanybeat earnings expectations and shares rose 16 percent but the luxury jewelery issued a dismal forecast, saying it sees no signs of a turnaround.
Trading was active, with 1.91 billion shares changing hands on the New York Stock Exchange; advancers outpaced decliners, 2,863 to 259.
TUESDAY: Fed's Evan's speaks; Obama press conference; House hearing on AIG; Earnings from Carnival
WEDNESDAY: Weekly mortgage applications; durable-goods orders; new-home sales; weekly crude inventories; Fed's Pianalto and Yellen speak
THURSDAY: Final GDP; Weekly jobless claims; new-home sales; earnings from Best Buy, GameStop; Geithner to unveil plan for overhauling the financial system; Fed's Lockhart, Fisher, Lacker and Stern speak
FRIDAY: Personal income/spending; Consumer confidence