Stocks racked up their best one-day gain in over a year on Monday as an agreement on a $1 trillion emergency rescue package from the EU quelled fears a new credit crisis would derail European economies.
The bailout fund approved by European leaders in the early hours of Monday drove the S&P 500 to its highest opening jump on record as indexes rushed back into positive territory for the year after last week's sharp slide.
Banks ranked among the top beneficiaries as the rescue deal opened up short-term lending markets and calmed fears of a possible Greek debt default. The S&P Financial index <.GSPF> climbed 5.6 percent and was the top percentage gainer among S&P sectors. Bank of America Corp jumped 6.9 percent to $17.30.
The package of standby funds and loan guarantees available to euro-zone governments shut out of credit markets is on the scale of the U.S. government's $700 billion Troubled Asset Relief Program in 2008 designed to stave off the credit crisis and calm swooning markets.
This could've been another situation like when Bear Stearns and Lehman Brothers failed, but the rescue plan shows how serious Europe is about preventing that, said Alan Lancz, president of Alan B. Lancz & Associates, an investment advisory firm, in Toledo, Ohio.
Some analysts cautioned, however, that longer-term concerns remained over whether euro-zone nations saddled with high debt loads would be able to manage their balance sheets. The euro, which rose more than 2 percent during the session, erased most of those gains to trade slightly higher by the end of trading in New York.
The Dow Jones industrial average <.DJI> gained 404.71 points, or 3.90 percent, to 10,785.14. The Standard & Poor's 500 Index <.SPX> rose 48.85 points, or 4.40 percent, to 1,159.73. The Nasdaq Composite Index <.IXIC> added 109.03 points, or 4.81 percent, to 2,374.67.
All three indexes achieved their strongest gains since March 23, 2009, when the United States released details of a plan to buy toxic assets from banks after a market slide that had pushed major indexes to their lowest in 12 years just weeks before.
The market is telling us that this was the right move, said Marc Pado, U.S. market strategist at Cantor Fitzgerald, in San Francisco. The size of the bullet that we dodged here is huge.
Howard Silverblatt, an analyst at Standard & Poor's, said that based on records dating back to the late 1960s, the S&P 500's percentage and point gains at the open were both records. The broad-based index jumped 52.97 points at the open -- a gain of 4.8 percent.
Although advancing stocks on the New York Stock Exchange outnumbered decliners by 19 to 1, volume was well below the massive volumes traded during the sell-off on Thursday and Friday.
The CBOE VIX volatility index <.VIX>, known as Wall Street's fear gauge, fell 29.6 percent -- the largest percentage drop in its history -- to end at 28.84 after leaping to its highest level in more than a year on Friday.
In another bullish sign, 88 percent of stocks in the S&P 500 remained in a long-term uptrend as of Friday, with their 50-day moving average above their 200-day moving average, according to Concept Capital, a New York-based brokerage.
Technology shares were also among the top gainers after the Nasdaq entered a technical correction on Friday, falling more than 10 percent from a peak on April 23.
Shares of Apple Inc jumped 7.7 percent to $253.99, while Google Inc rose 5.8 percent to $521.65.
Boeing Co provided one of the biggest boosts to the Dow, climbing 6.4 percent to $71 after Goldman Sachs raised its rating on the stock to buy from neutral. The top contributor to the blue-chip Dow's advance was industrial stock Caterpillar Inc , which jumped 7.4 percent to $66.69.
McDonald's Corp increased 3.8 percent to $70.58 after posting a rise in its April same-store sales.
Suntech Power Holdings Co Ltd shot up 11.8 percent to $11.73 after saying first-quarter revenue would beat Wall Street's expectations.
On the downside, Dean Foods Co dropped 28.4 percent to $10.47 after posting first-quarter earnings that missed estimates and withdrew its full-year profit outlook.
About 12.49 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, compared with last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 19 to 1, while on the Nasdaq, roughly seven stocks rose for every one that fell.
(Reporting by Edward Krudy; Additional reporting by Ryan Vlastelica; Editing by Jan Paschal)