Stocks jumped on Thursday as changes in bank accounting rules boosted optimism the financial system may stabilize in the short term, while world leaders agreed on measures to fight the recession.

U.S. regulators relaxed rules on how banks price assets, which had shaken financial institutions with hefty write-downs, and leaders of the G20 announced an additional trillion dollars to support the International Monetary Fund and boost trade.

Adding to the positive tone, shares of large manufacturers such as Caterpillar Inc rose on hopes the economy may be stabilizing. Government data showed U.S. factory orders rose in February for the first time in seven months, adding another bright spot on the economic front.

Psychologically it's a big boost, said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama, of changes to the mark-to-market accounting rule. What it does is probably takes away the fear of imminent bank collapse.

The Dow Jones industrial average <.DJI> gained 250.41 points, or 3.23 percent, to 8,012.01. The Standard & Poor's 500 Index <.SPX> jumped 25.86 points, or 3.19 percent, to 836.94. The Nasdaq Composite Index <.IXIC> spiked 54.27 points, or 3.50 percent, to 1,605.87.

Thursday's rally helped the S&P 500 rise nearly 23.8 percent from 12-year lows reached early last month and cut its year-to-date losses to around 7.2 percent.

There seems to be a sense that perhaps we have reached bottom and we're turning to the upside, said Hellwig.

But he cautioned: I don't think everyone is willing to embrace that though because we still have potential risks going through the rest of the month.

Financial shares, a key driver of the recent rally, rose on bets for an improving global economy and the relaxation of accounting rules. Shares of Bank of America climbed 1.3 percent to $7.14 while Citigroup rose 1.9 percent to $2.73. S&P financial stocks <.GSPF> climbed 1.8 percent.

The Nasdaq is now up more than 1.8 percent for the year.

The industrial sector was among top gainers in a broad-based rally as U.S. data showed new orders received by factories rose 1.8 percent in February after a 3.5 percent drop in January, breaking six months of declines and boosting hopes of a start to climbing out of recession.

Shares of construction, mining and forestry machinery manufacturer Caterpillar jumped 9.3 percent to $31.69 while aerospace technology provider United Technologies Corp climbed 5.5 percent to $46.29.

Shares of IBM rose 3.4 percent to trade above $100 for the first time since early October and were the top boost to the Dow industrials.

Chevron gave another boost to the blue-chip Dow industrials, up 4 percent at $71.02 as crude oil futures shot up nearly 9 percent to $52.66 a barrel on optimism for an economic recovery.

Shares of General Motors rose 5.7 percent to $2.04 a day after executives said March auto sales pointed to the first signs of brightening in the auto industry.

(Editing by James Dalgleish)