Dow: Biggest jump in nearly 5 years

NEW YORK (CNNMoney.com) -- Wall Street's wild ride resumed Monday with the Dow industrials soaring 286 points, marking its biggest point gain in nearly 5 years, helped by financial sector strength and subsiding credit market fears.

The Dow Jones industrial average (up 286.87 to 13,468.78, Charts) soared 286 points, or 2.2 percent, staging its biggest point gain since October 2002, just a day before the Federal Reserve holds its policy meeting.

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The 30-stock blue chip index, which tumbled 281 points Friday on credit market fears, is up 8.1 percent so far this year.

The broader S&P 500 (up 34.61 to 1,467.67, Charts) gained 2.4 percent while the tech-laden Nasdaq composite index (up 36.08 to 2,547.33, Charts) climbed 1.4 percent.

"With the Fed speaking tomorrow, I thought we would have had a much more modest market - I did not expect this kind of strength," said Doreen Mogavero, president and CEO at Mogavero, Lee & Co.

Stocks zigzagged earlier in the session as Wall Street braced for more credit market woes, in a session with no major economic readings and few companies reporting quarterly results.

But instead of more doom and gloom, investors found renewed strength within the financial sector, which helped fuel Friday's selloff. Banks such as Goldman Sachs (up $8.11 to $187.79, Charts, Fortune 500), Citigroup (up $2.63 to $48.35, Charts, Fortune 500), and Merrrill Lynch (up $4.50 to $74.55, Charts, Fortune 500) all finished sharply higher.

The KBW Bank Index (up $5.46 to $107.30, Charts) surged over 5 percent, while the AMEX Securities Broker/Dealer index (up $8.09 to $222.44, Charts) gained 3.8 percent.

There was also speculation on Wall Street that the Federal Reserve will offer some comfort to jittery investors at its policy meeting Tuesday in light of the recent woes in the subprime, credit and housing markets.

"I think with everything we've seen recently and the shifting momentum to the downside, there's hope out there that we will hear something soothing from the Fed," said John Wilson, chief technical strategist at Morgan Keegan.

The central bank, which will issue its rate decision Tuesday afternoon, is widely expected to leave the Fed funds rate untouched at 5.25 percent, where it has remained since August 2006.

But Wall Street will be paying particularly close attention to the accompanying statement for any clues about the central bank's outlook on interest rates and its stance on the recent woes in the credit markets.

"There's certainly the potential for disappointment if they don't say enough or do something unexpected," said Sid Bakst, senior portfolio manager at Robeco, Weiss, Peck & Greer.

Investors also kept a close eye on oil prices which were fell sharply during Tuesday's session. U.S. light crude for September delivery lost $3.42, or 4.5 percent, to $72.06 a barrel. Just a week ago, oil prices reached a record trading high of $78.77.

In corporate news, just two days after Bear Stearns (up $5.46 to $113.81, Charts, Fortune 500) said it was weathering the worst financial market atmosphere in 22 years, the company announced Sunday its president and chief operating officer Warren Spector had resigned amidst the firm's recent credit problems.

Private equity firm Cerberus Capital Management named ex-Home Depot (up $0.70 to $36.89, Charts, Fortune 500) chief Robert Nardelli as Chrysler's chairman and chief executive officer. Nardelli left Home Depot in January under a cloud of shareholder disapproval.

Fast-food giant McDonald's (up $0.94 to $49.46, Charts, Fortune 500) said Monday it agreed to sell its Boston Market business to Sun Capital Partners Inc., in an effort to focus on its namesake brand.

American Home Mortgage (down $0.26 to $0.44, Charts), which closed its doors Friday, slashing nearly 7,000 jobs, filed for Chapter 11 bankruptcy protection Monday, sending shares of the battered mortgage lender 36 percent lower after last week's steep decline.

Japanese firm Fast Retailing raised its offer for the department store Barney's, a division of Jones Apparel Group (up $0.02 to $20.53, Charts, Fortune 500), to $950 million, besting a previous offer from the Dubai-based firm Istithmar.

After several busy weeks of companies reporting quarterly results, only a handful of firms are set to report earnings tomorrow including Cisco Systems (Charts, Fortune 500).

Despite the strong surge in major indices, market breadth was mixed Monday. Winners beat losers by nearly 6 to 5 on the New York Stock Exchange on volume of 2.28 billion shares. Decliners edged out advancers on the Nasdaq, on volume of 2.74 billion shares.

Treasury prices retreated, raising the benchmark yield on the 10-year note rising to 4.73 percent from 4.69 late Friday. Bond prices and yields move in opposite directions.

The dollar gained against the euro and the yen.

COMEX gold for December fell $1.10 to $683.30 an ounce.