Stocks rose on Monday on reports that Washington could end up with a big stake in Citigroup's common stock as the surest sign yet that it is ready to avert further paralysis of the financial system.

A report in the Wall Street Journal said the U.S. government may end up holding as much as 40 percent of Citigroup's common stock.

The Dow Jones industrial average <.DJI> rose 57.43 points, or 0.78 percent, to 7,423.10. The Standard & Poor's 500 Index <.SPX> gained 6.81 points, or 0.88 percent, to 776.86. The Nasdaq Composite Index <.IXIC> was up 6.24 points, or 0.43 percent, at 1,447.47.

(Reporting by Leah Schnurr; Editing by James Dalgleish)