For the first time this month, the Dow Jones industrial average ended the day Monday higher than it began: 936 points higher, to be exact, making for the largest point gain ever and the biggest single-day percentage gain in 75 years.
The surge came as governments and central banks around the world mounted an aggressive, coordinated campaign to unlock the global flow of credit, an effort investors said they had been waiting for.
Some experts greeted the rally as a turning point in the slow-motion crash that has erased five years worth of value from the stock market in the last few weeks.
“The market clearly was getting priced for an Armageddon, a depression, for the end of Western civilization as we know it,” said Edward Yardeni, the investment strategist. “A lot of people realized these were extraordinarily good prices to buy stocks.”
But others warned that the problems at the center of the current crisis, including a global credit squeeze and deepening economic problems, were far from solved, and could set the stage for more volatility in markets.
Reeling from the worst week in stocks since 1933, officials announced over the weekend that they would flood the financial system with billions of dollars in liquidity and provide capital for troubled banks, throwing out the traditional financial playbook in favor of a series of moves that officials hoped would get banks lending again.
Relief poured through the markets.
The 11.6 percent gain in the broad Standard & Poor's 500-stock index was that gauge's best single-day gain since 1939.
Stocks in Paris and Frankfurt had their best single-day gains ever, rising more than 11 percent.
The Dow Jones industrial average, which closed at 9,387.61, up 11.1 percent, is now back to its levels on Thursday. Only four times in its history has the Dow risen more percentage points in a day. Those gains came in 1929, 1931, 1932 and 1933.
But trading volume was lighter than last week, meaning fewer investors jumped in to buy than were selling last week. Portions of the credit markets – which remained locked tight before the weekend – were closed for the Columbus Day holiday, so investors may have had trouble gauging the reaction among banks and big lenders to the new global initiatives. Some analysts said that stock investors held off on their trades to see how the credit markets would react.
Cash-strapped investors may also be eager to pocket their profits from Monday's gains, which could send stocks lower when the markets reopen today.
There were signs on Monday, however, that the coordinated government efforts had started to make some headway in loosening the flow of credit.
The seeds of the rally began Sunday afternoon, after more than a dozen European countries – including Britain, France, Germany and Spain – announced aggressive plans to guarantee loans, take ownership stakes in banks, or prop up ailing companies with billions in tax dollars.
The weekend efforts spurred rallies in stock markets worldwide. In Hong Kong, the Hang Seng index surged 10.2 percent. The Australian S&P/ASX 200 index in Sydney gained 6 percent. The Nikkei in Tokyo was closed Monday, but soared more than 13 percent early today.