NEW YORK — Stocks broke a five-day losing streak Wednesday as hope spread that China and the U.S. are taking convincing action to restart their economies.
Prices for key commodities such as oil and metals also soared, lifting shares of industrial companies like Alcoa Inc. and Caterpillar Inc.
Speculation that China will unveil more government spending this week on major construction projects drove up worldwide prices for raw materials and the companies that produce them.
In Washington, the Obama administration announced details of a plan that could help struggling U.S. homeowners by lowering the cost of their monthly mortgage payments.
The rally was broad, lifting shares in every industry except for financial services. Major indicators surged more than 3 percent during the day before ending with gains of more than 2 percent.
The advance followed five straight sessions of unrelenting selling that left major indexes at levels not seen in more than a decade. That left stocks overdue for a bounce, traders said.
"Virtually everyone was expecting some sort of a bounce, we just didn't know exactly when that would occur," said Randy Frederick, director of trading and derivatives at Charles Schwab. "You can't go down forever."
Wall Street followed the lead of overseas markets, which rose sharply on optimism over the possible Chinese economic stimulus plan. In the U.S., investors were further encouraged by details of a Washington program designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.
The Dow Jones industrial average rose 149.82, or 2.2 percent, to 6,875.84.
Broader indexes also rose. The Standard & Poor's 500 index added 16.54, or 2.4 percent, to 712.87. On Tuesday, the S&P 500 index fell to its first close below 700 since October 1996.
The Nasdaq composite index gained 32.73, or 2.5 percent, to 1,353.74. The Russell 2000 index of smaller companies rose 10.29, or 2.9 percent, to 371.30.
Four stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 7.51 billion shares compared with 7.41 billion Tuesday.
"We're very oversold," said Nicholas Colas, chief market strategist at BNY ConvergEx. "That's been slim comfort in the last couple of months, but it's still true."
Industrial and commodity stocks led the market higher as oil prices jumped on hopes for the Chinese stimulus. Aluminum producer Alcoa Inc. jumped 71 cents, or 12.8 percent, to $6.24, and Caterpillar Inc. rose $2.97, or 13.2 percent, to $25.44. Exxon Mobil Corp. rose $1.32, or 2.1 percent, to $65.68, while Chevron Corp. rose $1.55, or 2.7 percent, to $59.28.
Not all stocks carved gains. General Electric Co. hit an 18-year low Wednesday as it fought continued speculation that it may have to sink more money into GE Capital, which makes loans for credit cards, overseas mortgages and commercial projects.
GE pulled off its lows after the company said it didn't need outside funding. That helped other financial stocks erase some of their losses. The stock fell 32 cents, or 4.6 percent, to $6.69, after falling to as low as $5.73, a level not seen since 1991.
News that U.S. Bancorp is chopping its dividend by 88 percent weighed on financial stocks. The Minneapolis-based bank, seen as one of the healthier companies in the industry, joins the ranks of JPMorgan Chase & Co. and dozens of others that have slashed their dividends to preserve capital during the credit squeeze and recession. U.S. Bancorp fell $1.57, or 12.5 percent, to $11.01.
Analysts warned that the market's advance Wednesday could be fleeting.
"Everybody's been beaten up so much in the last couple weeks, you've got to believe that people are gun-shy," said Bill Stone, chief investment strategist at PNC Wealth Management. "There's going to be a little bit of a lack of conviction this week particularly ahead of the Friday employment numbers."
The Labor Department will release its employment figures for February on Friday. The monthly report has become one of the most watched indicators of the economy's health, as rising unemployment and the loss of millions of jobs has led consumers to spend less.
The stock rally put pressure on bond prices, which investors had been fleeing to as a safe haven. The yield on the benchmark 10-year Treasury note was 2.98 percent, up from 2.89 percent late Tuesday.
Overseas, Japan's Nikkei stock average rose 0.9 percent, while Hong Kong's Hang Seng index gained 2.5 percent. Britain's FTSE 100 rose 3.8 percent, Germany's DAX index jumped 5.4 percent, and France's CAC-40 rose 4.7 percent.
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