Investors applaud government's latest plan
— -- Stocks enjoyed their best rally of the year Monday and the most explosive recovery yet in the bear market, bringing investors some reason to believe stocks might finally be on the mend.
The government's latest plan to detoxify financial assets gumming up the banking system put the all-clear sign on the stock market, at least for now.
The Dow Jones industrial average soared 497 points, or 6.8%, to 7776 for its biggest percentage gain since October. Investors regained $700 billion in paper wealth, according to the DJ Wilshire 5000.
Investors, burned by several false rallies during the bear market, are hoping the worst is over and that the government's latest plan will repair credit markets. "If (the government) gets this plan to work, this will grease the wheels and ungum the pipes," says Joseph Saluzzi, trader at Themis Trading. "This is good. We've been waiting for it."
Notable aspects of Monday's rally included its:
• Breadth. All 30 stocks in the Dow rose, and 496 of the stocks in the Standard & Poor's 500 index gained ground.
• Longer-term significance. The Dow and S&P put up their biggest percentage gains since October. More meaningful: The S&P is up 21.6% in the past 10 trading days, its best two-week rally since the bear market knocked it to 13-year lows.
• Industry healing. All 10 industry sectors of the S&P 500 gained. Financial stocks jumped 17.9%, the biggest gain among all the sectors. Shares of JPMorgan Chase, Bank of America and Wells Fargo all leaped more than 20%.
The jump in financial stocks was especially encouraging because it shows investors are beginning to think the latest plan might be what it takes.
"Investors are applauding because it's going to work," says Jack Ablin of Harris Private Bank. The plan is lucrative enough to encourage private investors to bid on the troubled assets, he says, and banks that need to rid themselves of loans to start lending again will be able to.
Others hope the government's latest move means it's setting the rules and stepping aside to let private investors take over, says Hugh Johnson of Johnson Illington Advisors. "There's a sense of relief this may be the last big plan."
