NEW YORK - Wall Street got the news it wanted on the economy's biggest problems -- banks and housing -- and celebrated by hurtling the Dow Jones industrials up nearly 500 points.
Investors added rocket fuel Monday to a two-week-old advance, cheering the government's plan to help banks remove bad assets from their books and also welcoming a report showing a surprising increase in home sales. Major stock indicators surged about 7 percent, including the Dow, which had its biggest percentage gain since October.
Analysts who have seen the market's recent false starts still hesitate to say Wall Street is recovering from the collapse that began last fall. But the day's banking and housing news bolstered the growing belief that the economy is starting to heal, and that is what had investors buying.
"It's just hard to argue that there isn't an improvement in economic activity on the horizon," said Jim Dunigan, executive vice president at PNC Wealth Management.
The market began turning around two weeks ago on news that Citigroup Inc. was operating at a profit in January and February. A spate of more upbeat economic reports helped the market build on its gains, although the rally stalled last Thursday and Friday.
Analysts said they saw more fundamental strength in Monday's buying than they saw at the start of the rally. Dave Rovelli, managing director of trading at brokerage Canaccord Adams, said there appeared to be less short covering, which occurs when traders are forced to buy to cover misplaced bets that stocks would fall. Short covering contributed to the market's surge after the Citigroup news.
But while analysts were pleased with the market's performance Monday, they were also still cautious; Wall Street more than gave back its big yearend rally and kept falling during January and February.
The Dow rose 497.48, or 6.8 percent, to 7,775.86, its highest finish since Feb. 13. It was the biggest point gain for the blue chips since Nov. 13 when they rose 552 points and the biggest percentage gain since Oct. 28, when they rose 10.9 percent. It was the fifth-biggest point gain in the Dow's history.
Broader stock indicators also surged. The Standard & Poor's 500 index rose 54.38, or 7.1 percent, to 822.92, crossing the psychological milepost of 800. The Nasdaq composite index rose 98.50, or 6.8 percent, to 1,555.77.
The Dow is now up 1,228 points, or 18.8 percent, from March 9, when it finished at its lowest point in nearly 12 years, although it's still down 1,000 points in 2009. The S&P 500 is up 21.6 percent in that time.
