Dow Ends up Nearly 400 After Bailout of Citigroup

A giant American flag is reflected in the glasses of trader Bradley Silverman as he works on the...

A giant American flag is reflected in the glasses of trader Bradley Silverman as he works on the floor of the New York Stock Excahnge, Friday, Nov. 21, 2008. Wall Street staged a surprising comeback Friday, with the major indexes jumping more than 5 percent and the Dow Jones industrials surging nearly 500 points in a late afternoon rally, ending another volatile week that saw stocks reach six-year lows.

(RICHARD DREW/AP Photo)

The government's plan to bail out Citigroup sent Wall Street soaring Monday for the second straight session as investors hoped that the worst of the financial industry's problems might finally be over. The Dow Jones industrials surged nearly 400 points, and all the major indexes jumped more than 4.5 percent.

The rally gave the market its first two-day advance in three weeks and the Dow its biggest two-day percentage gain since October 1987, the month of the Black Monday crash.

The Dow's 891-point climb over the two sessions also wiped out the 872-point plunge it suffered on Wednesday and Thursday, when investors were anguished over the fate of Citigroup Inc. and financial companies in general, and the future of the nation's automakers.

Although investors sensed late last week that a rescue of Citigroup was forthcoming, they nonetheless were heartened, even emboldened, by the U.S. government's decision late Sunday to invest $20 billion in the company and guarantee $306 billion in risky assets.

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Wall Street's enthusiasm grew not only because the bailout answered questions about Citigroup but also because many observers saw the move as offering a model for how the government might stabilize other banks.

"The government has taken a new quill out," said Scott Bleier, founder of market advisory service CreateCapital.com. "They've gone to where they didn't go before in terms of trying to secure the system. Some of that vulnerability seems to be gone now."

Still, the market remained wary, especially with the economy in a serious downturn. The Dow was up more than 500 points in the last hour before giving up some of its gains. Many investors wanted to take some money off the table before any bad news arrived. And the market has frequently done sharp reversals since the start of the credit crisis 15 months ago.

The efforts by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. to help stabilize Citigroup are only the latest this year to support a banking system troubled by bad debt and flagging confidence.