Wall Street looked set to rally Monday following a series of measures and cash injections by governments and central banks designed to prop up the banking sector and avoid a global meltdown.
Asian stocks closed higher while in Europe markets rallied, led by bank and energy stocks.
"The global markets are giving a nod of approval to what the governments, central banks and the U.S. Treasury are doing to boost confidence in the market place," Peter Cardillo, chief market economist at Avalon Partners, told Reuters.
"What we could see is a market that begins to stabilize," Cardillo said. "Obviously there's some questions about the plans. Are we going too far? Are we all becoming socialist? But the bottom line: the market needed to get some concrete plan and I think finally we've gotten something that's going to restore confidence."
Monday's rally was a welcome reprieve after the Dow last week fell 1,874 points, or more than 18 percent, the worst point and percent drop in the blue-chip index's history.
Trading was expected to be light today as the bond market was closed for the Columbus Day holiday.
Morgan Stanley shares were up 26 percent in pre-market trade after news that Mitsubishi UFJ Financial Group has acquired $7.8 billion of perpetual non-cumulative convertible preferred stock with a 10 percent dividend and a conversion price of $25.25 per share, and $1.2 billion of perpetual non-cumulative non-convertible preferred stock with a 10 percent dividend.
Major central banks pledged Monday to pour unlimited amounts of dollars to unblock frozen credit markets at fixed interest rates auctions.
The sizes of the reciprocal currency arrangements (swap lines) between the Federal Reserve and the Bank of England, the European Central Bank and the Swiss National Bank will be increased to accommodate whatever quantity of U.S. dollar funding is demanded, the Fed said in a statement.
The BoE, the ECB and the SNB will announce simultaneously the rate at which tenders will be conducted, and the same rate will apply to all counterparts of the respective central bank. The rate will be set in advance of the tenders, on the same day the operations are conducted.
Meanwhile, Britain spent 37 billion pounds ($64 billion) to bail out three major banks, Royal Bank of Scotland, HBOS and Lloyds, and the state could become the main shareholder in two of them.
Royal Bank of Scotland will boost its capital by 20 billion pounds, with the government taking 5 billion pounds in preference shares and a share issue of 15 billion pounds underwritten by the government. Lloyds and HBOS will also be part of the plan once they merge successfully, the UK Treasury said.
The continued turmoil in the financial markets could spark a wave of mergers among banks and remaining brokerage firms in the coming weeks, Wall Street executives told CNBC.
And Spain's largest bank, Santander, is in talks to buy Sovereign Bancorp , but no deal has yet been reached, Santander said.
The Federal Reserve said Sunday it approved the takeover ofWachovia and its banking subsidiaries by Wells Fargo , effectively making it the victor over Citigroup, which dropped out of the battle to take over Wachovia last week.
Goldman Sachs , the biggest oil trader on Wall Street, has been restricted from making a market in price assessment agency Platts' daily oil trading window as counterparty anxiety grows, two sources familiar with the move said.
In other merger news, General Motors apparently approached Ford about a possible merger in July, but Ford rejected the idea and ended the discussions last month, the New York Times reported.
After Ford decided to remain independent in increasingly difficult auto market, GM turned its attention to Chrysler. For the last month, it has been in preliminary merger talks with Chrysler’s owner, the private-equity firm Cerberus Capital Management.
A deal is not certain, but people with knowledge of the talks described the chances of it happening as "50-50," the newspaper reported.
MONDAY: Bond market closed for Columbus Day holiday; stock market is open.
TUESDAY: Earnings from Johnson & Johnson, Pepsi
WEDNESDAY: Weekly mortgage applications; Empire State manufacturing survey; PPI; retail sales; business inventories; weekly crude inventories; Fed's beige book; Earnings from Abbott Labs, Coca-Cola, JPMorgan, Wells Fargo and eBay
THURSDAY: CPI; weekly jobless claims; industrial production; Philly Fed survey; weekly natural-gas inventories; Earnings from Bank of New York Mellon, BB&T, Citigroup, CIT Group, Continental, Harley-Davidson, Hershey, Merrill Lynch, Nokia, PNC Bank, Southwest Air, United Technologies, AMD, Capital One, Google and IBM
FRIDAY: Housing starts; consumer sentiment; Earnings from Gannett, Honeywell and Sony Ericsson
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