WALL Street has had another big rally as investors bet the government will take some big steps to help the economy.

All the major indexes rose more than 2 percent yesterday, including the Dow Jones industrial average, which rose more than 200 points as investors looked past another bleak jobs report and awaited word from Washington about an economic stimulus plan and changes to the government's financial rescue program.

The Senate was expected to vote on its version of a stimulus plan that would include a mix of spending and tax cuts. The Senate bill would cost US$937 billion; the House already passed a similar version.

Financial stocks led the market as investors also awaited the government's latest revisions to its lifeline for banks. Treasury Secretary Timothy Geithner and other top officials are close to finishing a plan to overhaul the government's US$700 billion financial rescue fund. Geithner is expected to announce the changes in a speech on Monday.

Some investors had been worried that the changes would involve nationalizing many banks and, in the process, wiping out shareholders. Many investors are hoping the plan will relax rules requiring businesses to assign a value to all of their assets each quarter. Advocates say altering the rule even temporarily could make it easier for banks to lend without worrying about depleting their cash reserves and running afoul of accounting standards.

The Dow industrials rose 217.52, or 2.70 percent, to 8,280.59 after rising 106 on Thursday.

Broader stock indicators also jumped. The Standard & Poor's 500 index rose 22.75, or 2.69 percent, to 868.60, and the Nasdaq composite index rose 45.47, or 2.94 percent, to 1,591.71.

The day's gains have left the Nasdaq higher for the year; investors have been turning to the index's tech stocks on the belief they will help lead the market higher.

Investors focusing on the government's plans were unfazed by a terrible employment reading. The Labor Department said US employers slashed 598,000 jobs in January, the most since late 1974. The unemployment rate rose to 7.6 percent, the highest since late 1992.

But the market has been bracing for the wave of layoffs to hit the economy and are now looking for the response from the Obama administration and lawmakers.

"All focus right now is now is really on Washington," said Dan Cook, senior market analyst at IG Markets in Chicago. He said investors are hoping the unemployment report was bad enough that it goads lawmakers into swift action on the stimulus plan. "It's the hope that the Senate will act and get this approved."

Stocks have been getting a lift on expectations the plan will pass, analysts say.

Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York, said investors now are wondering "will government stimulus stop this virus that's spreading throughout the country?"

On Thursday, the major indexes soared more than 1 percent as Wall Street shrugged off troubling economic reports and searched for bargains among battered retail and technology stocks.

Bond prices were mixed yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.98 percent from 2.92 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.28 percent from 0.26 percent.

Cook said investors are eager for the stimulus plan to pass even if it takes time to work its way into the economy, as many economists predict.

"We just want to see a plan and have a direction," he said of investors. "We can adjust from there and make moves on the fly."

Stocks would tumble if Washington doesn't come up with aid for the economy, Cook said. He contends that even an imperfect effort could help shore up confidence among consumers. Their spending accounts for more than two-thirds of US economic activity. Consumers' reluctance to open their wallets since the fall has acted like a huge weight on the economy.

"If we then fail to come up with anything today or Monday we could really see the bottom fall out," Cook said, referring to the stock market.

But Cook and others caution that the plan won't repair the economy's problems overnight.

"As the realization sets in that this is going to take some time to work its way into the system confidence could wane a bit," said Matt King, chief investment officer for Bell Investment Advisors, in Oakland, Calif.

In that case, the market would be following its pattern in recent months as other government steps were unveiled - early euphoria waned as the reality of a troubled economy set in.

He said stock prices represent good bargains but that the market could remain stuck in the range at which its traded this year, even with government aid. To push higher, investors will need some sign the economy is improving, or at least not getting worse.

Yesterday's rally reflects fear among some investors that they will miss out on a jump in stocks if the government comes up with the right mix of medicine for the economy, King said.

Many of the yesterday's steepest gains occurred in hard-hit parts of the market like financials and retailers. Analysts said some traders who had placed bets that stocks would fall were being forced to come in and buy stock to cover their positions. Such moves can exacerbate market advances.

Financial stocks rose. Bank of America Corp. jumped US$1.29, or 26.7 percent, to US$6.13, while JPMorgan Chase & Co. rose US$2.09, or 12.6 percent, to US$27.63. Smaller banks also rose. Fifth Third Bancorp rose 99 cents, or 60.4 percent, to US$2.63. State Street Corp. advanced US$2.95, or 10.7 percent, to US$30.49.

Among retailers, Macy's Inc. advanced 95 cents, or 10.9 percent, to US$9.70.

The Russell 2000 index of smaller companies rose 15.62, or 3.43 percent, to 470.70.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where volume came to 1.61 billion shares.