Bank of America Corp., General Motors Corp. and United Technologies Corp. climbed more than 3 percent as futures traders bet the Fed will lower its benchmark rate by as much as 0.75 percentage point at its next meeting. Wachovia Corp. rallied 77 percent after Wells Fargo & Co., the biggest West Coast bank, agreed to buy the lender for about $15.1 billion. National City Corp. climbed 27 percent and Sovereign Bancorp Inc. added 13 percent.
The Standard & Poor's 500 Index gained 21.18, or 1.9 percent, to 1,135.46 at 10:04 a.m. in New York. The Dow Jones Industrial Average added 129.82, or 1.2 percent, to 10,612.67. The Nasdaq Composite Index rose 39.31, or 2 percent, to 2,016.03. Eleven stocks gained for every two that fell on the New York Stock Exchange.
The S&P 500, which has fallen 6.8 percent over the past five days, pared losses at the end of its worst week since 2002. The benchmark index for U.S. stocks tumbled 4 percent yesterday as reports on jobless claims and factory orders reignited concern the economy is sinking into a recession.
The S&P 500, down 23 percent this year, still trades for 21.6 times profit from the past 12 months. Only four of 48 developed and emerging nations tracked by MSCI Inc. -- Switzerland, Jordan, Colombia and Morocco -- have a higher price-to-earnings ratio, according to data compiled by Bloomberg yesterday.
U.K. stocks advanced, led by banks, after Wells Fargo & Co. of the U.S. agreed to buy rival Wachovia Corp. HBOS Plc and Barclays Plc led gains in London. The FTSE 100 Index added 47.73, or 1 percent, to 4,918.07 at 5:33 p.m. in London, heading for a 3.7 percent loss this week.
Europe's Dow Jones Stoxx 600 Index trades at 10.8 times earnings, near the lowest since at least 2002.
Brazilian stocks gained for the third time in four days, led by retailers and homebuilders, on speculation the economic slowdown will prompt the U.S. to pass a financial market rescue package and cut interest rates. The Bovespa index added 2.2 percent to 47,159.70 at 9:32 a.m. New York time. For the week, it was poised for a loss of 7.1 percent.
Japan's stocks fell, capping the worst week in 13 months, on concern demand will decrease in the U.S. after economic reports showed the nation's largest overseas market is faltering. The Nikkei 225 Stock Average declined 216.62, or 1.9 percent, to close at 10,938.14 in Tokyo.
Australian stocks fell, led by mining companies, after commodities prices dropped as reports showing a weakening U.S. economy heightened concern a $700 billion bank bailout won't be enough to reverse the global economic slowdown. The S&P/ASX 200 Index fell 1.4 percent to 4,695.40 at the close in Sydney, taking its decline this year to 26 percent.
Indian stocks fell, with the benchmark set for its second weekly drop, as concern grew that a $700 billion U.S. bank rescue plan won't halt a global slowdown. Commodity producers led declines. The Bombay Stock Exchange's Sensitive Index, or Sensex, dropped 316.95, or 2.4 percent, to 12,738.72 as of 12:40 p.m. local time.