Wall Street is getting the good news it wants on the economy's biggest problems: banks and housing. Investors reignited a two-week rally Monday, cheering the government's plan to help banks remove bad assets from their books as well as a report showing a surprising increase in home sales. Major stock indicators jumped as much as 6 percent, including the Dow Jones industrial average, which soared more than 400 points.
The Treasury Department's bad asset cleanup program would tap money from the government's $700 billion financial rescue fund and involve help from the Federal Reserve, the Federal Deposit Insurance Corp. and the participation of private investors.
The government's announcement was what the market had waited weeks to hear. Treasury Secretary Timothy Geithner had announced an outline of the program last month but provided few details then about how it would work, leading to a poor reception in the markets.
Meanwhile, the housing report released Monday was overwhelmingly positive for the markets even though it showed a decline in home prices in February. Investors are embracing any sign that a glut in homes for sale may be easing.
The market had received another dose of housing good news last week on the troubled industry as housing starts for February came in much better than expected.
Collapsing home prices and the damage they have caused banks are at the center of the economy's current problems and are a major focus for the stock market. Banks have sharply curbed lending after becoming weighed down with loans that have gone bad, especially mortgages.
Investors had been largely disappointed in the government's efforts to date to restore the banks to health, but finally seemed encouraged by the long-awaited announcement Monday of details for the government's bad loan cleanup plan.
"The actions that we're getting from a policy standpoint are very helpful in removing the sand from the gears," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "That is going to be good for the financials."
The plan seeks to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.
Shares of the country's largest banks, which have been pounded in recent weeks over concerns about their ability to weather the crisis, soared on Monday. Citigroup Inc. jumped 17 percent, and Bank of America Corp. added 18 percent.
Even banks seen as being on better footing posted big advances. JPMorgan Chase & Co. rose 18 percent, while Wells Fargo & Co. rose 17 percent.
In late afternoon trading, the Dow rose 436.55, or 6 percent, to 7,714.93.
Broader stock indicators also surged. The Standard & Poor's 500 index rose 42.34, or 5.5 percent, to 810.88, crossing the psychological milepost of 800. The Nasdaq composite index rose 42.34, or 5.5 percent, to 1,531.94.
The Russell 2000 index of smaller companies rose 24.79, or 6.2 percent, to 424.90.
More than 10 stocks rose for every one that fell on the New York Stock Exchange, where volume came to a moderate 1.14 billion shares.
Monday's advance is bolstering an upbeat mood on Wall Street that has taken hold in the past two weeks. The Dow is coming off its first back-to-back weekly gains since May last year.
Stocks began rising sharply on March 10 after Citi and BofA told investors they had made money in the first two months of the year. Better-than-expected reports on retail sales and home building also lifted the market.
Jim Dunigan, executive vice president at PNC Wealth Management, said investors are more receptive to the government's plan to help banks and the economy because the latest version ropes in money from private investors.
Dunigan said the skeptical tone has blanketed Wall Street since the fall has eased since the market began its rally on March 10 after Citigroup surprised investors with an upbeat assessment of its business.
Investors welcomed the rise in home sales Monday even though the biggest jump in nearly six years came as first-time buyers pounced on deep discounts of foreclosures and other distressed properties. Analysts say it could be a nascent sign of recovery. But only weeks ago traders might have dwelled on the 15.5 percent drop in median prices.
"It's like putting on a different pair of glasses and you think you saw something different today than you saw yesterday," he said. "It's just hard to argue that there isn't an improvement in economic activity on the horizon."
Bond prices fell as stocks rose. The moves were moderate as investors remained mindful of the Federal Reserve's plan announced last week to buy government debt to help drive down borrowing costs by reducing interest rates.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.66 percent from 2.64 percent late Friday. The yield on the three-month T-bill rose to 0.21 percent from 0.19 percent Friday.
Oil rose $1.73 to $53.80 a barrel and the dollar was mixed against other major currencies. Gold fell. The price of gold has risen in recent weeks as investors have worried about the faltering economy and a weaker dollar.
Homebuilders extended an early rise after the home sales report. KBR Inc. rose 65 cents, or 4.7 percent, to $14.48, while Toll Brothers Inc. rose $1.60, or 9.4 percent, to $18.60. Hovnanian Enterprises Inc. jumped 28 cents, or 24 percent, to $1.46.
Subodh Kumar, an independent investment strategist in Toronto, said the Fed's announcement that it would buy government debt and the details on plans to help banks are giving traders hope for recovery. Still, he remains cautious.
"The market is shedding some of its excess pessimism. That doesn't mean the market goes straight up," he said.
In corporate news, Daimler AG rose following the announcement that Abu Dhabi-based Aabar Investments PJSC would buy a stake in the automaker best known for its Mercedes-Benz brand. Daimler rose $1.41, or 5 percent, to $29.86.
Expectations are not only low for economic readings like home sales but for corporate earnings. That has made pessimistic traders more likely to jump on any kernel of good news.
Drugstore chain Walgreen Co. said Monday that its earnings fell 7 percent in the fiscal second quarter, while jewelry retailer Tiffany & Co. said its fourth-quarter profit plunged more than 75 percent. But Walgreen rose 10 percent and Tiffany rose 14 percent after results weren't as bad as feared.
Traders' relief indicates that better-than-expected numbers from other companies could help lift the market. For most companies March 31 is the end of their first quarter.
Dave Rovelli managing director of trading at brokerage Canaccord Adams, contends that Monday's jump represents more than so-called short covering that occurs when traders are forced to step into the market and buy to cover misplaced bets that stocks would fall.
"There is definitely new buying," he said. Rovelli said the approaching end of the quarter can make money managers eager to buy into a market.
Overseas, Britain's FTSE 100 rose 2.9 percent. Germany's DAX index rose 2.7 percent, and France's CAC-40 rose 2.8 percent. Japan's Nikkei stock average rose 3.4 percent.
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