* Stocks soar in late rally on hope crisis resolution near
* Bonds fall as safe-haven bid ends on crisis plan news
* Oil also rises on plan, impact of hurricanes
* Dollar rises, then eases on crisis resolution plan
(Fixes headline to show that bonds fell. No changes in text)
By Herbert Lash
NEW YORK, Sept 18 (Reuters) - U.S. stocks had their best
day in six years on Thursday on news of a U.S. Treasury plan to
resolve a credit crisis that has rocked financial markets all
week, which erased an earlier safe-haven bid for gold and U.S.
government debt.
The late-stage rally, which sent the Dow up more than 400
points and the Nasdaq and benchmark S&P 500 up more than 4
percent, capped a day of whip-saw trade in global markets.
Initial enthusiasm over a move by the world's leading
central banks to thaw the credit crunch with an injection of
$180 billion initially sent stock markets up, only to turn
negative as fears of financial contagion -- including questions
about the future of investment banks Morgan Stanley and Goldman
Sachs -- spread through markets.
News that U.S. Treasury Secretary Henry Paulson has spoken
with Congressional lawmakers about a plan to deal with bad debt
similar to the creation of the Resolution Trust Corporation in
1989 that resolved the U.S. savings and loan crisis spurred the
late rally.
"If the government can come up with a comprehensive plan
that is viewed by the market as a plan that would help in
containing the problems in the financial sector in the U.S.,
that would be seen as a very positive development," said
Matthew Strauss, senior currency strategist at RBC Capital
Markets in Toronto.
The Dow Jones industrial average closed up 410.03 points,
or 3.86 percent, at 11,019.69. The Standard & Poor's 500 Index
rose 49.91 points, or 4.32 percent, at 1,206.30. The Nasdaq
Composite Index jumped 100.25 points, or 4.78 percent, at
2,199.10.
For all three indexes it was the biggest one-day percentage
gain since October 2002 --when the last bull market was born.
Earlier in the day, in a sign of tight credit and market
fear, Putnam Funds said it closed its prime money market fund
because of heavy redemptions from institutional investors on
Wednesday. Credit quality of the fund was not an issue, Putnam
said.
In a comment echoed by other traders and investors, Anthony
Conroy, head trader for BNY ConvergEx in New York, said: "There
are no safe havens right now."
The investment portfolio of State Street, one of the
largest custodian banks in the world, came under question.
"Investors are taking the approach that, 'Shoot first, ask
questions later,'" said Gerard Cassidy, an analyst at RBC
Capital.
Oil prices also rose on optimism over U.S. government
efforts to resolve the financial crisis, and amid mounting
concern over the impact of back-to-back hurricanes on U.S.
energy inventories.
U.S. crude rose 72 cents to settle at $97.88 a barrel,
adding to a $6.01-gain on Wednesday. London Brent crude rose 35
cents to $95.19.
European stocks closed lower after reversing gains in late
trade as fears of outlook for financial firms weighed.
The FTSEurofirst 300 index of top European shares closed
down 0.6 percent at 1,063.69 points, its fourth straight
session of losses.
The index has lost about 9 percent so far this week, and is
on track for its worst week since the attacks of Sept. 11,
2001.
HBOS Plc jumped 17 percent after Lloyds TSB said it would
take over the embattled UK lender in a $22 billion deal the
government helped. Lloyds fell 15.1 percent.
The U.S. dollar rose against the yen and recouped most
losses against the euro in a broad surge with U.S. stocks on
the news that Paulson was talking about a Resolution Trust
Corp-type solution to the current financial crisis.
The dollar was last up 1 percent against the yen at 105.36
yen, while the euro rose 1.2 percent to 151.22 yen.
The dollar fell against major currencies, with the U.S.
Dollar Index fell 0.13 percent at 78.132.
The benchmark 10-year U.S. Treasury note fell 37/32 to
yield 3.56 percent. The 30-year U.S. Treasury bond slid 54/32
to yield 4.18 percent.
Gold prices spend most of the day higher, rising above $900
an ounce, on safe-haven buying, but slipped late in the day.
Spot gold prices fell $12.30 to $850.40 an ounce.
Asian stocks overnight fell. Japan's Nikkei share average
ended down 2.2 percent to a three-year low. The MSCI
Asia-Pacific ex-Japan stocks index fell 3.7 percent after
earlier touching the lowest since July 2006.
(Reporting by Ellis Mnyandu, Burton Frierson, Gertrude
Chavez-Dreyfuss in New York; David Sheppard in London and
Blaise Robinson in Paris; Writing by Herbert Lash; Editing by
Leslie Adler)
