NEW YORK — Wall Street appears to have put its "panic mode" on pause.
Stocks moved sharply higher for a second straight session Monday as the federal government's rescue of Citigroup Inc. and President-elect Barack Obama's pledge to enact a sizable economic-stimulus plan soothed investors' jittery nerves.
The Dow Jones industrial average leapt almost 400 points, bringing its two-day gain to nearly 900 points, or 11.8%. That's the best two-day gain since the Dow soared 16.6% in the two days following the Oct. 19, 1987, market crash.
Market watchers reacted cautiously to the rally, however, pointing out that stocks had been beaten down so badly in last week's fear-driven sell-off that any rebound was likely to be strong.
"Bear-market rallies are like this -- they're huge. It's not a new bull market," said Phil Roth, market analyst at brokerage Miller Tabak & Co.
Roth said the rally was triggered by Obama's strongly worded promise to boost the economy, while the naming of his economic team removed a smidgen of uncertainty shadowing the market.
"The financial issues are being addressed," Roth said. "Right now, people are happy that something is being done."
Financial stocks were perhaps the biggest beneficiary of the government's agreement Sunday to guarantee more than $300 billion in Citigroup's troubled assets.
The Standard & Poor's financial-sector index bounded a record 18.5%, and Citigroup jumped $2.18, or 58%, to $5.95.
But the market and especially the financial sector are likely to remain under pressure, experts said.
Stocks experienced a similar surge in early October, but the rally lacked staying power. Indeed, the record one-day gain for the Dow was 11.1% on Monday, Oct. 13, in response to an earlier financial rescue effort cobbled together on a Sunday night.
Some saw danger signs in the Citigroup bailout. The need for the government to backstop a large chunk of assets at a major bank illustrates the depth of potential losses facing other financial giants, noted David Ellison, chief investment officer of the FBR mutual-fund group.
"It tells you that conditions are not good," Ellison said. All the big banks "ate at the same table the last five years."
Under the rescue plan, the government agreed to invest an additional $20 billion in Citigroup, on top of $25 billion previously committed. It also agreed to absorb the first $29 billion in losses of a portfolio of $306 billion in deeply troubled assets.
