* Global efforts to stabilize banks calm markets
* Morgan Stanley jumps after news of stake purchase
* GM rises on news it had merger talks with Chrysler
* Dow up 6.2 pct, S&P up 6.2 pct, Nasdaq up 6.3 percent
(Updates to early afternoon, changes byline)
By Kristina Cooke
NEW YORK, Oct 13 (Reuters) - U.S. stocks surged on Monday,
following their worst week ever, as global efforts to
recapitalize banks sparked a rally in financial shares, while
credit markets showed some signs of loosening up.
Stocks were headed for their biggest percentage gain in a
single day since two days after the Black Monday crash of
October 1987.
Morgan Stanley <MS.N> was among the biggest percentage
gainers on the S&P 500, soaring more than 70 percent, after
Japan's Mitsubishi UFJ Financial Group <8306.T> said it paid
$9 billion for a 21 percent stake in the firm. For details see
[].
Wachovia <WB.N> climbed 2.3 percent after the Federal
Reserve approved the $12.46 billion takeover of the U.S. bank
by Wells Fargo & Co <WFC.N>.
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 <.GSPF> rose 4.2 percent.
"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.
The Dow Jones industrial average <> jumped 523.53
points, or 6.20 percent, to 8,974.72. The Standard & Poor's
500 Index <.SPX> soared 55.74 points, or 6.20 percent, to
954.96. The Nasdaq Composite Index <> was up 104.37
points, or 6.33 percent, at 1,753.88.
General Motors <GM.N> jumped 28 percent to $6.25 after
reports that the automaker has been in merger talks with
rivals Chrysler LLC and Ford Motor Co <F.N>, whose shares
surged 20.6 percent to $2.40. [].
Defensive and consumer staples stocks rose as investors
picked up shares in companies generally considered better
positioned to weather an economic downturn. Johnson & Johnson
<JNJ.N> rose 9 percent to $60.87.
Among tech shares, Apple Inc <AAPL.O> was up 6.4 percent
at $103, after Citigroup raised its recommendation on the U.S.
technology hardware and equipment sector to "market weight"
from "underweight." Microsoft <MSFT.O> gained 11 percent to
$23.88.
Energy companies tracked the price of oil higher. Crude
oil rose $3.68 to $81.38 a barrel on optimism over the
governments' moves to shore up confidence in the banking
system. Exxon Mobil <XOM.N> gained 6.2 percent to $66.25, and
Chevron <CVX.N> climbed 7.6 percent to $62.20.
Morgan Stanley shares spiked 74.5 percent to $16.88, while
those of Wachovia rose 2.3 percent to $5.27.
The optimism over bank rescues, however, was tempered by a
U.S. bank sector downgrade by Citigroup. JPMorgan <JPM.N>
shares fell 4.1 percent to $39.99.
Wall Street fell for an eighth straight session on Friday,
as investors feared the credit crisis was spiraling out of
control and the global economy was threatened by deep
recession.
In a sign that credit markets may be loosening up, the
cost for banks to borrow dollars, sterling and euros from each
other over three months fell. [].
(Reporting by Kristina Cooke; Editing by Jan Paschal)
