U.S. Stocks Rally on Federal Plan to Shore Up Financial System (Elizabeth Stanton)

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(Bloomberg) -- U.S. stocks rose on prospects the government is formulating a ``permanent'' plan to shore up financial markets and regulators and pension funds took steps aimed at curbing bets against banks and brokerages.

Bank of America Corp., American Express Co. and General Motors Corp. climbed more than 10 percent after Senator Charles Schumer proposed a new agency to pump capital into troubled financial companies. Wachovia Corp. rallied 48 percent, while Morgan Stanley and Goldman Sachs Group Inc. erased most of their earlier plunges, as regulators in the U.S. and U.K. stiffened rules against so-called short sales and the nation's three largest public pensions stopped lending shares of Goldman and Morgan Stanley to short sellers.

The Standard & Poor's 500 Index advanced 37.69, or 3.3 percent, to 1,194.08 at 3:15 p.m. in New York, recovering more than half of its tumble yesterday. The Dow Jones Industrial Average rose 337.73, or 3.2 percent, to 10,947.39. Four stocks advanced for each that fell on the New York Stock Exchange.

``Any actions regulators or other entities or players take to try to slow down the bear raids will be received positively,'' said David Katz, chief investment officer of Matrix Asset Advisors in New York, which manages $1.4 billion. ``There's no reason a Goldman Sachs or a Morgan Stanley should be forced to sell themselves in a shotgun wedding if they've got economic models that work, and they do.''