Stocks climbed on Monday after the Obama administration revealed details of a plan to purge toxic assets from bank balance sheets, fueling optimism about a revival in bank lending and lifting financial shares.
The success of the Treasury's plan hinges on private investment, so markets were further encouraged when several large investors said they would participate in what has become a key part of the government's efforts to unlock credit markets and revitalize the recession-hit economy.
Removal of toxic assets from banks' balance sheets is seen as a crucial step in allowing banks to make new loans.
Banks were standouts in the broad-based rally, with Citigroup
The market is glad, they like what they hear, said Kevin Kruszenski, Head of Listed Trading, KeyBanc Capital Markets in Cleveland. This is a big first test (for Geithner) to have to take. The market being up is a vote of confidence for him.
The Dow Jones industrial average <.DJI> spiked 364.94 points, or 5.01 percent, to 7,643.32. The Standard & Poor's 500 Index <.SPX> jumped 39.32 points, or 5.12 percent, to 807.86. The Nasdaq Composite Index <.IXIC> gained 67.30 points, or 4.62 percent, to 1,524.57.
The benchmark S&P 500 index is up more than 18 percent from the bear market closing low set on March 9. The index may be set to close above 800 for the first time since February 13.
The plan involves generous government financing to woo big investors to buy up toxic bank assets.
The Treasury Department will kick off the financing for the so-called Public-Private Investment Program with $75 billion-$100 billion that will come from the $700 billion financial bailout fund approved by Congress last fall.
Adding to the positive tone, data showed the pace of sales of existing homes in the United States rose 5.1 percent in February, the biggest increase since July 2003. A rebound in the housing market is seen as key to an economic recovery.
The housing data helped the Dow Jones index of home builders <.DJUSHB> rally 10 percent, with shares of Lennar
A large merger deal in the energy sector and rising oil prices helped lift shares of oil companies, with Exxon Mobil
Canada's No. 2 oil company Suncor Energy
Meanwhile, U.S. crude futures rose 3.5 percent or $1.83 to $53.82 a barrel.
On the earnings front, upscale jeweler Tiffany & Co
The S&P Retail index <.RLX> rose nearly 4 percent.
And shares of Walgreen Co
(Additional reporting by Charles Mikolajczak, Editing by Chizu Nomiyama)