Stocks surge than 11%; Dow gains 936 in largest point gain ever

— -- Stocks enjoyed a much-needed rally Monday with the Dow Jones industrial average soaring more than 900 points on optimism governments around the world can stabilize the financial system.

The Dow, Nasdaq composite index and Standard & Poor's 500 indexes all soared more than 11% as investors hoped the many efforts by central banks to strengthen banks would begin to kick in. The rally in U.S. stocks snapped an eight-day sell-off and comes after strong showings in Asian and European markets as investors applauded the move toward a global coordinated response to the financial crisis.

The rally also comes just as investors' nerves were seriously worn down by what had been the worst week for stocks in history. Last week, the Dow fell 1874 points, or 18.2%, the deepest loss in a one-week period in history.

Much of the rally came from strength in the financial and materials stocks.

The Dow Jones industrial average surged 936.42, or 11.08%, to 9,387.61. It was the Dow's largest-ever point gain.

The previous record occurred March 16, 2000, during the waning days of the dot-com boom, when the blue chips closed up 499.19, or 4.93%.

Broader stock indicators also jumped Monday. The Standard & Poor's 500 index advanced 104.13, or 11.58%, to 1,003.35, and the Nasdaq composite index rose 194.74, or 11.81%, to 1,844.25.

About 2,900 stocks advanced on the New York Stock Exchange, while about 250 declined. But the trading volume of 1.22 billion shares was lighter than it had been last week, suggesting there was less conviction in the buying than during last week's selling.

Governments around the world have been taking unprecedented steps to calm investors and coax banks to lend. Late Friday, Treasury Secretary Henry Paulson announced plans for the U.S. government to inject capital into banks in exchange for partial ownership.

Officials from the Treasury Department and the Federal Reserve announced plans to meet later Monday with top executives from financial firms to work out details of the $700 billion plan aimed at thawing frozen bank lending that is stifling the economy.

President Bush acknowledged Monday that "people all over the world are understandably concerned" but said the United States and other nations are taking "responsible, decisive action" to rescue the global economy.

He said the United States will help banks gain access to capital and unfreeze credit markets.

"These are tough times for our economies," Bush said after meeting with visiting Italian Premier Silvio Berlusconi. "Yet we can be confident that we can work our way through these challenges."

Investors are also relieved Mitsubishi's UFJ Financial Group plans to invest $9 billion into Morgan Stanley.

While the bond market is closed for Columbus Day, LIBOR rates set in London this morning for 3-month interbank loans improved a bit, with the rate falling 0.07 percentage points.

Traders say the markets were overdue for a bounce, considering the Dow had fallen 40.3% from its record close last year on Oct. 9. "Right now it's a nice bounceback rally," says Todd Leone, trader at Cowen & Co. "Everyone is crossing their fingers hoping it will last."

Among the recent worldwide moves in the financial crisis:

• The Bank of England, the European Central Bank and the Swiss National Bank jointly announced plans to work together to provide as much short-term funding as necessary to help revive lending. The Bank of Japan said it was considering taking similar steps.

• The Bank of England, for its part, said it will use up to $63 billion to help the three largest British banks shore up their balance sheets.

• U.S. authorities announced new moves to aid the crippled banking system, including plans by the Treasury to buy U.S. bank stocks to pump capital into the financial institutions.

• The heads of the Group of Seven nations held a series of meetings in Washington to address the economic crisis.

• The administration announced the selection of a team of interim managers, picked an outside firm to help run the program and tapped Federal Reserve Chairman Ben Bernanke to head up the oversight board guarding against conflicts of interest.

Neel Kashkari, the assistant Treasury secretary who is interim head of the program, said officials were developing the guidelines that will govern the purchase of bad assets and had consulted with six specialist law firms on how the government will take partial ownership of banks.

A rebound in Asian markets Monday was quickly followed in Europe.

In Asia, Hong Kong's Hang Seng index surged 10.2%. Markets in Japan were closed for a holiday. In Europe, Britain's FTSE 100 jumped 8.26%, Germany's DAX index rose 11.40%, and France's CAC-40 surged 11.18%.

Investors worried that banks' reluctance to lend to one another would imperil economic activity by making it harder and more expensive for businesses and consumers to get a loan.

Even so, investors with properly diversified portfolios should remain calm even though there's panic around them, says Mark Hebner of asset management firm Index Funds Advisors.

"The people that get hurt on a roller coaster are the ones that try to get off while it's moving," he says.

But there were signs Friday that some investors believed the market is near a bottom. On Thursday, selling accelerated in the last hour of trading. The Dow was down 221 points at 3 p.m. but closed down 679 points an hour later. On Friday, the Dow was down 468 points at 3 but rocketed 790 points and was up 322 points just after 3:30. It then sold off but closed down only 128.

"This kind of volatility in the market tells you that there are huge disagreements among investors about what the fundamentals are, about what the outlook is," said Ethan Harris, managing director and chief U.S. economist at Barclays PLC.

Central banks around the world were forced to cut interest rates this week after continuing problems in the credit market triggered concerns that banks will run out of money.

Contributing: Jeffrey Stinson in London; Paul Wiseman in Hong Kong, Douglas Stanglin in McLean, VA., wire reports