Led by financial stocks, the market made its first big move upward in weeks Tuesday after Citigroup Inc. said it had operated at a profit during the first two months of the year. All the major indexes soared more than 4 percent, and the Dow Jones industrials at times shot up more than 300 points.
Still, while word of Citi's performance at least temporarily broke a months-long torrent of bad news from the banking industry, analysts weren't ready to say the stock market was at a turning point and about to barrel higher.
"To have a sustained rally, we have to have a shift in sentiment," said Kurt Karl, chief U.S. economist at Swiss Re. "One day isn't going to make a trend.
But the Citigroup news offered investors some hope that the first quarter will show some signs of improvement.
In a letter to employees Monday, Citi Chief Executive Vikram Pandit said the performance so far this year has been the bank's best since the third quarter of 2007 — the last time it recorded net income for a full period. Based on historical revenue and expense rates, Citi's projected earnings before taxes and one-time charges would be about $8.3 billion for the full quarter.
Pandit declined to say how large credit losses and other one-time items have been that would at least partially offset profit.
Citi shares jumped more than 30 percent while Bank of America Corp. rose more than 25 percent; both are Dow components and helped propel the average higher. Other banking stocks also rose sharply.
Financial stocks have been a primary driver in a market collapse that has left the major indexes at their lowest point in more than a decade. Every report of loan losses and asset write-downs have sent banking stocks to incredible lows — Citi fell below $1 a share last week. And fears that hundreds of billions of dollars in government bailouts wouldn't be enough to save the big banks exacerbated the fears on the Street.
But Ben Halliburton, chief investment officer of Tradition Capital Management warned that the advance was likely just another bear market rally.
A bear market is defined as a drop of 20 percent from a market peak — and stocks passed that point last year and continued to plunge, leaving the Dow and S&P 500 at less than half the record highs they reached in October 2007. A bear market rally is an advance that lifts stocks off their lows, but that quickly evaporates as pessimism remains in the market.
"I would be surprised to see us trade back over 800 in the near term," Halliburton said, referring to the Standard & Poor's 500 index. "The news coming out on the economic front will continue to be rather gloomy."
Analysts suggested that the market's gains, especially among financial stocks, could also be attributed to short covering, an investment strategy that tends to drive rallies in volatile markets. Short-sellers are traders who sell borrowed stock and then buy it back later on the hopes that the price will fall. If they believe a stock will be going up, they have to "cover" their positions, or buy shares to repay the loan.
Reports surfaced Tuesday that federal regulators are considering a proposal to reinstate the uptick rule, which backers say helps protect companies from excessive shorting.
In midafternoon trading, the Dow jumped 289.36, or 4.4 percent, to 6,836.41. Dow stocks with the biggest gains included General Electric Co., which jumped $1.44, or 19.4 percent, to $8.85. GE has a big financial services division, so it tends to move with banking stocks.
The Standard & Poor's 500 index rose 34.59, or 5.1 percent, to 711.12, while the Nasdaq composite rose 73.02, or 5.8 percent, to 1,341.66.
The Russell 2000 index of smaller companies rose 19.86, or 5.8 percent, to 363.12.
Advancing issues outnumbered decliners by 15 to 1 on the New York Stock Exchange, where volume came to 1.07 billion shares.
Jon Merriman, chief executive of brokerage Merriman Curhan Ford in San Francisco, said the comments from Citi's Pandit are an indication that the bank is lending.
"Maybe Citibank is not going to zero, that means it's going to lend again and then the economy will turn," he said. "People today in the stock market are connecting those dots. And the market is up broadly, it's not just the banks."
Investors were further encouraged by Federal Reserve Chairman Ben Bernanke who called for a revamp of the country's financial regulatory system. Speaking before the Council of Foreign Relations, Bernanke said "too big to fail" companies must be subject to more rigorous supervision to prevent them from taking on excessive risk. Bernanke's remarks come as the Obama administration and Congress begin to devise their overhaul strategies.
Citigroup's announcement proved to be the dose of good news Wall Street had been waiting for to spark a bounce, but there was still plenty of pessimism in the market.
"There's nothing that anybody can do to turn the market around," said Harry Rady, chief executive of Rady Asset Management. "This is just a little bear-market blip."
Halliburton was hesitant to put much stock in Citigroup's announcement for fear of rising loan losses that could eat away at the operating profit. As long as housing prices are declining and loan defaults are increasing, "they are going to have to take asset write-downs," he said. "I don't think this is a game changer."
Government officials have been examining additional ways to stabilize the bank should further problems arise, according to a report in The Wall Street Journal Tuesday citing people familiar with the matter. Late last month, in its third attempt to rescue the bank from collapse, the Treasury Department moved to take up to a 36 percent stake in Citi.
Citi surged 35 cents, or 33 percent, to $1.40, while Bank of America jumped 98 cents, or 26.1 percent, to 98 cents. JPMorgan Chase & Co. rose $3.14, or 20 percent, to $3.14.
Big gainers included tech and industrial stocks. Caterpillar Inc. rose $2.23, or 9.3 percent, to $26.15. Among tech stocks, Intel Corp. rose 99 cents, or 7.9 percent, to $13.54. Cisco Systems Inc. rose $1.05, or 7.7 percent, to $14.67.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 2.97 percent from 2.88 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged from late Monday at 0.23 percent.
The dollar was mixed against other major currencies, while gold prices sank.
Light, sweet crude for April delivery fell 22 cents to $46.85 a barrel on the New York Mercantile Exchange.
Buoyed by the gains in the U.S., European markets soared. Britain's FTSE 100 rose 4.8 percent, Germany's DAX index jumped 5.3 percent, and France's CAC-40 gained 5.6 percent. Earlier Tuesday, Hong Kong's Hang Seng index jumped 3.1 percent, while Japan's Nikkei stock average slipped 0.4 percent.