Stocks: Bailout rally

Dow rallies 400 points as investors cheered the global response to the crisis.

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By Catherine Tymkiw

When will stock markets hit a bottom?
  • Within a few days
  • Within a week
  • Within a month
  • They already have

NEW YORK (CNNMoney.com) -- Stocks surged Monday morning as investors cheered the global response to the deepening financial crisis, following the worst week on Wall Street in history.

The Dow Jones industrial average (INDU) jumped 400 points, or 4.8% with bank stocks leading the way. The Standard & Poor's 500 (SPX) index rose 4.3% and the Nasdaq composite (COMP) added 4.4%.

U.S. bond markets are closed Monday for the Columbus Day holiday.

Markets have gotten slammed because of the deepening credit crisis. In fact, the Dow ended its worst week ever Friday, capping a staggering eight-session selloff that resulted in a 2,400-point loss. It's not just the size of the loss keeping investors on edge, it's also the gyrations. On Friday, the Dow whipsawed, falling as much as 697 points in the first minutes of trading before quickly climbing back into positive territory, only to turn lower shortly after.

The whiplash has left investors scrambling and world leaders struggling for a way out.

Monday morning, Neel Kashkari -- appointed last week to oversee the $700 billion U.S. bailout program and the newly created Office of Financial Stability -- made his first public speech. Kashkari, a former executive at Goldman Sachs, offered details about how the bailout will be implemented.

House Democrats will also meet Monday to discuss a potential second economic stimulus package, although House Republicans are reportedly skeptical of a second package, according to CNN.

World leaders gathered over the weekend to work on solutions for stemming the fallout from the world's worst financial crisis in decades. Following an emergency meeting Sunday, European nations agreed to shore up their troubled banks by adding capital and guaranteeing inter-bank lending.

Early Monday, the British government said it would invest $63 billion into the Royal Bank of Scotland, HBOS and Lloyds TSB to help the battered banks navigate through the crisis.

Also on Monday, four central banks, including the Federal Reserve, announced new measures aimed at thawing the credit markets. Provisions include providing unlimited short-term dollar funds at fixed interest rates.

In other banking news, Morgan Stanley (MS, Fortune 500) announced Monday that it has sold 21% of itself to Japanese banking giant Mitsubishi UFJ Financial Group for $9 billion in stock.

On tap. Investors could be in for another rough ride as Citigroup (C, Fortune 500) and Merrill Lynch (MER, Fortune 500) ready to report results this week, giving another glimpse into just how deep their losses continue to be. And a slew of economic reports are also due out, including readings on consumer spending and housing.

None of the reports, corporate or economic, are due out Monday.

Overseas markets. Stocks in overseas markets were trading higher - though down from earlier highs - the first market signal following the most coordinated effort to date to address the global financial crisis.

Japanese markets were closed Monday.

Dollar and oil. The U.S. dollar pushed lower early Monday. The greenback was down modestly against the Japanese yen, the 15-nation euro and the British pound.

Crude prices, meanwhile, stepped higher. Oil prices have been under pressure amid worries that the global crisis would undercut demand. Late last week, OPEC announced it would hold an emergency meeting Nov. 18 to address the issue.

Prices, which have plunged some 44% from the record $147.27 a barrel set on July 11, were up $4.01 at $81.71 a barrel early Monday. To top of page

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