NEW YORK — Wall Street got the news it wanted on the economy’s biggest problems — banks and housing — and celebrated by hurtling the Dow Jones industrials up nearly 500 points.
Investors added rocket fuel Monday to a two-week advance, cheering the government’s plan to help banks remove bad assets from their books and welcoming a report showing a surprising increase in home sales. Major stock indicators surged more than 6 percent, including the Dow, which had its biggest percentage gain since October.
Analysts who have seen the market’s recent false starts are still hesitant to say that Wall Street is indeed recovering from the collapse that began last fall. But the banking and housing news bolstered the growing belief that the economy is starting to heal, and that is what had investors buying.
“It’s just hard to argue that there isn’t an improvement in economic activity on the horizon,” said Jim Dunigan, executive vice president at PNC Wealth Management.
The market began turning around two weeks ago on news that Citigroup was operating at a profit in January and February. A spate of more upbeat economic reports helped the market build on its gains, although the rally stalled last Thursday and Friday.
Analysts said they saw more fundamental strength in Monday’s buying than they saw at the start of the rally. Dave Rovelli managing director of trading at brokerage Canaccord Adams, said there appeared to be less short covering, which occurs when traders are forced to buy to cover misplaced bets that stocks would fall.
Short covering contributed to the market’s surge after the Citigroup news.
“There is definitely new buying,” he said.
The Dow rose 497.48, or 6.8 percent, to 7,775.86, its highest finish since Feb. 13. It was the biggest point gain for the blue chips since Nov. 13, when they rose 552 points, and the biggest percentage gain since Oct. 28, when they rose 10.9 percent. It was the fifth-biggest point gain in the Dow’s history.
Broader stock indicators also surged. The Standard & Poor’s 500 rose 54.38, or 7.1 percent, to 822.92, crossing the psychological milepost of 800. The Nasdaq composite rose 98.50, or 6.8 percent, to 1,555.77.
Asian stocks continued the rise today, with the Topix index up 1.5 percent, its seventh straight gain. The Nikkei 225 was up 1.4 percent to a two-month high.
Investors had been largely disappointed in the government’s efforts to date to restore the banks to health.
“The actions that we’re getting from a policy standpoint are very helpful in removing the sand from the gears,” said Alan Gayle of RidgeWorth Investments. “That is going to be good for the financials.”
