Stks Jump;DJIA Has Biggest Percentage Gain Since Oct

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NEW YORK (MarketWatch) -- U.S. stocks surged Monday as banks such as Bank of America and economically sensitive stocks like Alcoa drove the Dow Jones Industrial Average to the highest levels in more than a month with a near 7% gain, its biggest rally since October.

A plan unveiled by the Treasury Department strikes at the heart of the problems for the financial system - fears about bank solvency because of balance sheets laden down by assets that nobody wants to buy. By creating a market for these securities, the plan may help banks to free up more capital for lending. In combination with other Federal Reserve and Treasury programs, the plan may "reflate" the U.S. financial system, economy and, indeed, the stock market.

"The [stock] market was looking for anything that was more definitive from Treasury than what we had," said Bud Haslett, chief executive of Miller Tabak Capital Management. "There are still are lot of unknowns, but it is more clear. The market is going to have a positive bias going forward."

Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund, who bet against the stock market for much of 2008, said the government's "reflation" efforts in recent weeks have turned the tide for stocks.

"I am not sure it's a bull market, but I do think that the market needs incremental, new bad news to go down, and needs nothing to go up," Di Mattia said.

"The simple fact that not every bank ends up like Lehman Brothers is a positive, once you have priced in depression," Di Mattia said.

The leading gainer on the Dow Jones Industrial Average: Bank of America, which has heavy exposure to "toxic" mortgage bonds and other assets through its purchase of Merrill Lynch. Shares of BofA rose 1.61, or 26%, to 7.80; Citigroup added 51 cents, or 19%, to 3.13; JPMorgan Chase rose 5.71, or 25%, to 28.86.

Overall, the Dow rose 497.48 points, or 6.84%, to 7775.86, its biggest percentage gain since an 11% surge on Oct. 28 and its highest close since Feb. 13 as all 30 components finished in the green. The broader Standard & Poor's 500 rose 54.38 points, or 7.08%, to 822.92, also its highest close since Feb. 13 and biggest gain since Oct. 28. The S&P 500 is up 22% from its 12 1/2-year closing low of 677 on March 9, technically a bull market. Still, the S&P 500 had a similar gain between Nov. 20 and Jan. 6, which was later wiped out.

The technology-oriented Nasdaq Composite rose 98.5, or 6.76%, to 1555.77, its biggest percentage gain since March 10. For 2009 so far, the Nasdaq has cut its losses to 1.35%.

The initial stock-market reaction suggested the Treasury's plan may be a good deal for both banks and the investors buying the toxic assets off them.
Among money managers interested in participating in the program, shares of BlackRock added 20, or 18%, to 133.96.
Another manager of distressed assets, Blackstone Group rose 1.51, or 24%, to 7.81.

Among insurers, whose investment portfolios include distressed credit assets, Lincoln National added 2.39, or 33%, to 9.70; Prudential Financial rose 4.42, or 26%, to 21.11.

The second-biggest gaining sector on the S&P 500 after the financial was the energy sector, adding 7.8%. Oil prices hit their highest levels since December during the session, and investors bet on commodities stocks that would benefit from an inflationary economic recovery.

Suncor Energy fell 45 cents, or 1.8%, to 24.84 after agreeing to acquire Canadian oil-sands peer Petro-Canada for about $15 billion in stock in an effort to cut costs and increase reserves. Petro-Canada added 5.28, or 22%, to 29.29.

Schlumberger rose 5.23, or 13%, to 46.75 after the oil-services giant said another round of layoffs is likely.
Shares of exploration and production company Devon Energy rose 4.44, or 9.3%, to 52.04.

On the Dow, shares of aluminum maker Alcoa rose 86 cents, or 13%, to 7.40.
Among the reasons traders are reluctant to call the move in stocks a new bull market is the extent of a worldwide slowdown in consumer spending and related commerce.

Walgreen rose 2.29, or 9.4%, to 26.58. Yet the drug store said fiscal second-quarter earnings declined as even sellers of staples are seeing customers rein in spending.

"Retailers are experiencing a "once-in-a-generation shift in consumer attitudes," Walgreen Chief Executive Gregory Wasson said in a conference call with analysts.

Tiffany added 3.14, or 16%, to 23.37 despite the jeweler's fiscal fourth-quarter-profit sharp decline, as its sales outlook for the year met investors' expectations.

Only a handful of stocks in the S&P 500 fell on the session.
Among them, tax preparer H&R Block fell 1.75, or 9.2%, to 17.38 as it warned that total retail returns it processed through March 15 declined from a year earlier.

Harris fell 2.68, or 8.7%, to 28.12 after Oppenheimer cut its rating on the maker of components for the communications and defense industries