Wall Street soars 11 percent on bank rescue and Morgan deal

By Kristina Cooke

NEW YORK (Reuters) - Wall Street roared back from its worst week ever with one of its best single days ever on Monday, as governments pledged to pour cash into struggling banks to restore confidence in a rocky global financial system.

Bargain-hunting investors scoured the wreckage from eight days of losses that had whacked more than 20 percent off the value of the benchmark S&P 500. Health care, utility and energy stocks rose the most in what was the first day of gains this month for the Dow and S&P 500.

Morgan Stanley drove the rally in financial shares, soaring 87 percent, after Mitsubishi UFJ Financial

Group completed its $9 billion investment in the U.S. bank as U.S. government support helped nail down a critical deal many investors had feared could fall apart. Wachovia climbed 13.6 percent after the Federal Reserve approved the $12.46 billion takeover of the U.S. bank by Wells Fargo & Co.

"The crucial issue for the market has been a lack of confidence and the most recent efforts to ease the credit crunch by governments and central banks have been very positive in terms of building confidence," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

Led by Britain, European governments agreed to multibillion-dollar guarantees for the banking system in moves that may become a crucial test of investor faith in government's ability to reverse the downward spiral.

The U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank also said they would lend commercial banks as much U.S. dollar liquidity as they needed to ease clogged interbank lending rates. The S&P financial index shot up 10.23 percent.

The Dow Jones industrial average rose 936.42 points, or 11.08 percent, to 9,387.61, its biggest one-day point gain ever and its biggest percentage gain since March 15, 1933.  Continued...