Bulls stage comeback
Dow jumps 157 points, biggest gain in eight months, after rebound overseas encourages investors.
NEW YORK (CNNMoney.com) -- Stocks soared Tuesday as a rebound in overseas markets reassured investors following last week's global decline, pushing the Dow industrials to their biggest gain in more than eight months.
The Dow Jones industrial average (up 157.18 to 12,207.59, Charts) jumped 1.3 percent, or 157.18 points, scoring its biggest one-day point gain since July 2006.
The Russell 2000 (up 18.82 to 778.88, Charts) small cap index lost 2.5 percent.
Treasury prices slipped, while the dollar gained against the yen but lost ground to the euro. Oil and gold prices rose.
Stocks rallied steadily all day, buoyed by strength in global markets and news of corporate takeover deals, notably Citigroup's $10 billion bid for Nikko Cordial, Japan's third-largest securities company.
Gains were broad based, covering a wide variety of stocks and sectors.
"Today is some welcome relief, but I think it's too early to say we're out of the woods yet," said John Forelli, portfolio manager at Independence Investment LLC.
The Dow and S&P 500 have fallen for eight of the past nine sessions, while the Nasdaq has fallen for six of the past nine sessions.
After such a sell-off, a bounce-back Tuesday was not surprising, analysts said. The advance was strong, and trading volume was robust.
"I think it's a sign we're stabilizing," said Ron Kiddoo, chief investment officer at Cozad Asset Management.
However, he acknowledged that the market will likely remain choppy for a few weeks.
As to what could possibly be the next catalyst to move stocks higher, Kiddoo suggested Friday's monthly employment report.
Ahead of that, Wednesday brings the release of the weekly oil inventories report in the morning and the Fed's beige book survey of the economy in the afternoon.
Also on Wednesday: Chicago Federal Reserve bank president Michael Moskow is speaking on the economy. Moskow is a voting member of the Fed's policy committee.
After the close, CV Therapeutics (Charts) said that its angina treatment was not effective in a study of patients with acute or long-term heart disease. Shares slumped 25 percent in extended-hours trading and were apt to be active Wednesday.
Stocks sank Monday - following last week's big sell-off - as investors mulled weak overseas markets and further signs of trouble in the subprime mortgage lending business.
But such concerns were set aside Tuesday, with investors taking comfort in solid gains overseas and some bullish corporate news.
Markets in Europe gained, bouncing back from several down sessions. In addition, markets in Asia rose as the yen fell after several up days.
Asian markets have been tumbling recently as the yen has been surging, with investors closing out carry trades, or bets on riskier assets, bought by borrowing in the currencies of countries with low interest rates, such as Japan.
In currency trading, the dollar rallied against the yen and edged higher versus the euro.
Citigroup shares rose 2.7 percent, and other financial shares bounced back as well, including Bear Stearns (up $4.50 to $149.00, Charts), Lehman Bros (up $3.11 to $74.23, Charts) and Goldman Sachs (up $7.37 to $197.37, Charts).
The Amex Securities Broker/Dealer (Charts) index rose 2.6 percent.
A variety of subprime mortgage lenders bounced back, after stumbling on Monday.
New Century Financial (up $0.46 to $5.02, Charts), NovaStar Financial (up $0.25 to $4.53, Charts), Accredited Home Lenders (up $1.52 to $17.58, Charts) and Fremont General (up $0.89 to $6.78, Charts) all posted big gains.
Among blue-chip gainers, 29 out of 30 shares advanced. Standouts included Hewlett-Packard (up $0.68 to $39.43, Charts), IBM (up $1.99 to $93.80, Charts), General Motors (up $0.68 to $31.12, Charts), Alcoa (up $0.68 to $32.41, Charts) and Altria (up $2.21 to $84.42, Charts).
Altria rose on a Deutsche Bank upgrade, Reuters reported.
Gold, silver, aluminum, steel, natural gas and oil services stocks all bounced back, too.
Market breadth was positive. On the New York Stock Exchange, winners trounced losers by almost 5 to 1 on volume of 1.83 billion shares. On the Nasdaq, advancers beat decliners by 4 to 1 on volume of 2.16 billion shares.
A morning report showed that U.S. labor productivity was revised downward in the fourth quarter, as expected. Unit labor costs, the report's inflation component, was revised upward.
A separate report showed that factory orders fell a steeper than expected 5.6 percent in January, after rising 2.6 percent in December.
Investors also took in comments from Treasury Secretary Henry Paulson, who said the housing sector slowdown and problems with subprime lenders won't have a big impact on the financial sector or the economy.
Treasury prices slipped, raising the yield on the 10-year note to 4.53 percent from 4.50 percent late Monday. Treasury prices and yields move in opposite directions.
U.S. light crude oil for April delivery rose 62 cents to settle at $60.69 a barrel on the New York Mercantile Exchange.
COMEX gold for April delivery rose $7 to $646.20 an ounce.