For a few hours Thursday on Wall Street, greed finally got the upper hand on fear.
The Dow Jones industrial average soared more than 400 points -- notching its biggest one-day percentage gain in almost six years -- as investors welcomed word that the federal government was weighing a comprehensive plan to end the financial crisis.
Pledges by regulators to increase oversight of short sellers -- traders who profit from falling share prices -- also buoyed stocks.
The rally, which followed the Dow's 449-point plunge Wednesday, was a welcome respite for investors who have been battered by a global crisis that has choked off credit, toppled storied financial institutions and threatened economic growth here and abroad.
"The market was really just looking for some semblance of good news, and for the time being this was enough to send it higher," said Kevin Marder of Marder Investment Advisors Corp. in Los Angeles.
The key is whether the talk of government action turns into concrete results. Congressional leaders met Thursday night in Washington with top Bush administration officials, including Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke and Securities and Exchange Commission Chairman Christopher Cox, to discuss options for defusing the crisis.
Officials said late Thursday that the government would step in to relieve some financial institutions of their bad assets.
"If they can free up capital and get the banks lending again, then it's a whole new ballgame," said William Buechler of Buechler Capital Asset Management in La Jolla.
The SEC reportedly was preparing new restrictions on short selling, the practice of borrowing and then selling shares with the intention of repaying the loan with shares bought later at a lower price. Short sellers have received some blame for the precipitous price declines in shares of financial companies such as Lehman Bros. Holdings, Morgan Stanley and Goldman Sachs Group.
The Dow finished the day up 410.03 points, or 3.9%, at 11,019.69. It was the blue-chip index's biggest percentage gain since October 2002. The broader Standard & Poor's 500 index rose 50.12 points, or 4.3%, to 1,206.51. The tech-heavy Nasdaq composite soared 100.25 points, or 4.8%, to 2,199.10.
Winners outnumbered losers 3 to 1 on the New York Stock Exchange. Long-term Treasury yields rose as investors moved from bonds into stocks. Volume was heavy in part because traders were positioning themselves for today's quarterly expiration of option contracts, which can add to volatility.
