U.S. stocks jumped more than 4 percent on Monday after long-awaited details from the Obama administration on its plan to remove distressed assets from bank balance sheets fueled optimism it will spark a revival in lending, driving up financial shares.

The success of the plan hinges on private investment, and several large investors have said they will participate in what has become a key part of the government's efforts to unlock tight credit markets and revitalize the recession-hit economy.

Removing toxic assets from bank balance sheets is seen key to freeing up banks to make new loans.

Banks were standouts in the broad-based rally, with Citigroup up 17.6 percent to $3.08 and Bank of America up 17 percent to $7.24. Both the KBW Bank Index <.BKX> and the S&P financial sector index rallied about 10 percent.

It is excellent that we've had statements by some money managers that they are interested in participating in the program, said Charles Lieberman, chief investment officer at Advisors Capital Management in Hasbrouck Heights, New Jersey.

Ultimately you have to bet that Treasury is going to get what it wants, which is a healthier banking system as well as an economic recovery.

The plan involves generous government financing to woo big investors to buy up toxic bank assets.

Adding to the positive tone, data showed the pace of U.S. existing-home sales 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 Dow Jones industrial average <.DJI> gained 322.25 points, or 4.43 percent, to 7,600.63. The Standard & Poor's 500 Index <.SPX> rallied 34.84 points, or 4.53 percent, to 803.38. The Nasdaq Composite Index <.IXIC> jumped 60.90 points, or 4.18 percent, to 1,518.17.

The benchmark S&P 500 index is up more than 18 percent from the bear market closing low set on March 9, and was on track for its first close above the 800 level since February 13.

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.

The housing data helped the Dow Jones index of home builders <.DJUSHB> rally 8.5 percent, with shares of Lennar and Ryland Group up 15 percent and 11.5 percent respectively.

A large merger deal in the energy sector and rising oil prices helped lift shares of oil companies, with Exxon Mobil up 4.6 percent at $69.15 and Chevron gaining 5 percent to $67.94.

Canada's No. 2 oil company, Suncor Energy , agreed to buy rival Petro-Canada
for about $14.9 billion to create Canada's largest oil company. Meanwhile, U.S. crude futures rose more than 3.5 percent or $1.82 to $53.89 a barrel.

On the earnings front, upscale jeweler Tiffany & Co jumped about 14 percent to $23.04 after reporting quarterly profit that beat expectations.

And shares of Walgreen Co rose 19.9 percent to $26.94 after the drugstore chain posted better-than-expected profit.

(Editing by Leslie Adler)