NEW YORK — Wall Street began the second quarter of 2008 with a big rally Tuesday as investors rushed back into stocks, optimistic that the worst of the credit crisis has passed and that the economy is faring better than expected.
The Dow Jones industrials surged nearly 400 points, and all the major indexes were up more than 3 percent.
Financial stocks were among the big winners after Lehman Brothers and Switzerland’s UBS issued new shares to help bolster their balance sheets. With that upbeat news and a fresh quarter ahead of them, investors appear willing to make some bets that the worst of the damage from the nation’s credit struggles has been felt.
Analysts say there must be a recovery in banks and brokerages to lead major stock indexes higher. Some of the biggest financial players had their sharpest moves of the year Tuesday — Citigroup shot up 11 percent, JPMorgan Chase rose 9 percent, and Leh man surged 18 percent.
“Investors have a difficult time making decisions about the stock market if they don’t have confidence in major financial institutions, so there’s been a lot of sideline cash,” said Richard Cripps, chief market strategist for Stifel Nicolaus. “The extreme conditions that we’ve seen here over the past few months has been missing that confidence . . . but that appears to be changing, and we’re seeing the response.”
Meanwhile, Wall Street got another boost when the Institute for Supply Management said its March index of national manufacturing activity rose to a reading of 48.6 — indicating a contraction but a slower one than in February and tamer than many analysts had predicted.
The Dow rose 391.47, 3.19 percent, to 12,654.36. It marked the eighth-biggest point gain ever for the Dow and the third time in two weeks it came close to or surpassed 400 points.
Broader stock indicators also gained sharply.
The Standard & Poor’s 500 index rose 47.48, or 3.59 percent, to 1,370.18 — the index’s best start to a second quarter since 1938. And the Nasdaq composite index rose 83.65, or 3.67 percent, to 2,362.75.
The advance was in contrast to a lackluster session Monday, where stocks managed a moderate gain in the final session of a dismal first quarter.
“This is a nice way to begin the second quarter,” said Todd Leone, managing director of equity trading at Cowen & Co. “All the financials are up big, and there’s a sense that things are turning. We definitely have not seen the last of the credit crisis, but we’re getting closer.”
