Stocks Soar Worldwide on Bank Bailout, Curb on Short Sales (Sarah Jones and Elizabeth Stanton)

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(Bloomberg) -- U.S. stocks surged in the biggest two-day global rally in history as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.

The Standard & Poor's 500 Index rose as much as 4.9 percent, its steepest gain in six years. The Dow Jones Industrial Average added almost 1,000 points from yesterday's low and markets from the U.K. to China advanced the most ever. U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke ignited the rally by proposing to shore up banks' balance sheets and guaranteeing money-market mutual funds, while the Securities and Exchange Commission banned short sales of financial firms.

Wachovia Corp. and Morgan Stanley jumped more than 30 percent, while General Electric Co. increased 10 percent.

``What the government and its regulatory agencies have tried to do here is restore some confidence and remove some fear,'' Robert Doll, chief investment officer of global equities at New York-based BlackRock Inc., which manages $436 billion in stocks, told Bloomberg Television. ``That will work in the short run and improve psychology.''

The S&P 500 advanced 45.15 points to 1,251.66 at 3 p.m. in New York, sending it to the biggest two-day rally since the aftermath of the 1987 crash. Eleven companies, all financial, rose more than 20 percent, and 26 other companies climbed at least 10 percent. The Dow Jones Industrial Average surged 356.46, or 3.2 percent, to 11,376.15. Five stocks advanced for each that fell on the New York Stock Exchange.