Stocks staged one of the biggest rallies of the year as hopes for a Federal Reserve interest cut boosted financial services companies for a second day, while falling oil prices eased concern about higher energy costs.
The surge put Wall Street on track for its biggest two-day advance in 4-1/2 years.
Banks, insurers and other financials led the surge after Federal Reserve Vice Chairman Donald Kohn said renewed financial market turmoil could slow the economy more abruptly than previously thought. He said policy-makers must be "flexible and pragmatic."
The Federal Reserve's Beige Book, which provides an anecdotal description of economic conditions, added to expectations for a rate cut.
The report said economic growth slowed in October and the first half of November as fallout from the housing slump took its toll.
Conditions Have Changed