The Dow surged nearly 500 points on Monday -- its biggest one-day gain since November -- after the Treasury Department removed a huge cloud of uncertainty hanging over Wall Street by revealing new details about its bank rescue plan.

Lifted by clarity on how the government will help banks get rid of up to $1 trillion of their toxic assets and an unexpected jump in existing home sales, the markets ended at their highest levels in more than a month.

Today's Markets

The Dow Jones Industrial Average rose 497.48 points, or 6.84%, to 7775.86, the S&P 500 gained 54.38 points, or 7.08%, to 822.92 and the Nasdaq Composite Index picked up 98.50 points, or 6.76%, to 1555.77. The consumer-friendly FOX 50 added 39.73 points, or 6.90%, to 615.21.

Monday's massive rally represents the fifth-largest point gain in the history of the Dow. However, on a percentage basis, the rally ranks as the 20th best one-day jump in the index's history. Either way, Monday's performance was a key landmark in what has been a very bullish March on Wall Street. 

“The market definitely likes what it’s hearing. It’s taking the uncertainty out of the equation,” Dave Rovelli, managing director of Canaccord Adams, told FOX Business.

Aside from new details about Treasury Secretary Timothy Geithner's "bad bank" rescue plan, the markets rallied around a better-than-expected housing report, positive earnings reports from Tiffany (TIF) and Walgreen and a $14.9 billion merger between Suncor Energy (SU) and Petro-Canada (PCA). But it's clear the markets were mostly focused on the Geithner plan.

“There is a shift in tone and temperament in the market that speaks to confidence in the plan being proposed by Geithner to price and dispose of toxic assets,” said Peter Kenny, managing director at Knight Capital Group. Pointing to a six-day win streak in Asia and another big rally in Europe, Kenny said the foreign markets have been “voting unequivocally yes” on this plan.

All 30 components of the Dow closed up by more than 2%, led by double-digit rallies for Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM). Non-financials like Alcoa (AA) and Caterpillar (CAT) also rose sharply. 

How Long Will It Last?

It’s clear the markets are in the midst of a huge bounce from their worst levels as the Dow, which is still down 11% year-to-date, has surged 19% from its 12-year low set on March 9. What remains less clear is how long the rally will last and whether or not the worst of the selling is over.

“The market is going to have to prove itself to a lot of people before they come screaming back in. People have been burned so deeply,” said Scott Martin, managing director at Astor Asset Management. “Other than a few bright spots, I don't think the economic data has shown any signs of putting in a bottom.”

The recent hot streak has been fueled by a number of key developments, including a string of positive comments from bank execs, the Federal Reserve’s decision to expand its balance sheet by up to $1.1 trillion and a stock market that many said was badly oversold.

From a technical standpoint, Monday’s rally was important as the S&P closed well above the key 800 level. Kenny predicted breaking through this resistance level could allow the index to jump another 5% to 10%. Ironically, Monday’s surge exceeded the Dow’s 494-point jump on Nov. 21, a rally fueled by news that Geithner was going to be named Treasury secretary.

Rescue Rally

The financial sector surged 16.4% on the Treasury plan and individual names like Morgan Stanley (MS) and PNC Financial (PNC) saw even heavier buying. 

While Geithner previously unveiled the principles of the bank rescue plan, a lack of specifics during the initial announcement slammed the markets, sending the Dow and S&P to 12-year lows. “Mr. Geithner showed up with more than the emperor’s clothes. We like what we saw,” NYSE trader Ben Willis of VDM Institutional Brokerage told FOX Business.

The Treasury said Monday it will leverage $75 billion to $100 billion of TARP funds to partner with private equity and hedge funds to buy up to $1 trillion of the assets at the center of the credit crisis. Banks have been reluctant to lend and forced to write down the value of these illiquid, mortgage-backed assets, which have lost value as the housing market has deteriorated. Click here to read more on the Treasury plan

It remains to be seen if the rescue will work as it’s not clear if the private sector will want to participate, but the “bad bank” plan received a major endorsement from Bill Gross, the manager of the world’s largest bond fund. “This is perhaps the first win/win/win policy to be put on the table and it should be welcomed enthusiastically,” the Pimco manager told Reuters.

M&A, Home Sales Boost Stocks

Wall Street also cheered another sign of an improving M&A picture. In a move that will create the largest Canadian oil company, Suncor Energy (SU) inked a deal Monday to buy rival Petro-Canada (PCA) in an all-stock deal worth $15.5 billion.

Stocks received a mid-morning boost after the National Association of Realtors said existing home sales unexpectedly jumped by 5.1% last month. The industry group said home prices suffered their second worst year-over-year drop in history, falling 15.5% from 2008, though they rose slightly from January. Home builders like Hovnanian (HOV) and KB Home (KBH) rallied around the report, which widely beat the Street's expectations.

In the commodities markets, crude oil built on last week's huge rally, which was its fifth straight weekly gain. The price of a barrel of crude settled at $53.80, up $1.73 on the day. Gold was off by $3.60 per ounce to $953.80.

Corporate Movers

General Electric (GE) lost its coveted “AAA” credit rating from Moody’s, which cited the conglomerate’s troubled GE Capital arm. However, the move was largely expected as S&P already downgraded GE and Moody’s maintained a stable outlook on GE.

Goldman Sachs (GS) could raise more than $1 billion by divesting 15% to 20% of its stake in Chinese bank ICBC, the Journal reported.

Tiffany (TIF) beat the Street with an adjusted-profit of 85 cents per share even as its sales tumbled 20%. The upscale jeweler’s forecast for 2009 earnings was below the Street’s view.

General Motors (GM) bondholders sent the White House a letter complaining the auto maker’s restructuring relies on a too rosy economic outlook and could still result in it filing for bankruptcy.

Daimler (DAI) received a $2.67 billion cash injection from Aabar Investments that will improve the German auto maker’s balance sheet and make the Abu Dhabi fund its largest shareholder.

American International Group’s (AIG) rivals complained to the Fed about the bailed-out insurer’s pricing practices, saying AIG used its government rescue to unfairly tilt the playing field, the Journal reported.

Nycomed, a private Swiss drug maker, hired Goldman Sachs (GS) to explore a sale that could be worth as much as 10 billion euros, the Journal reported. 

Walgreen (WAG) exceeded expectations with an adjusted-profit of 69 cents per share thanks to a 4% boost in prescriptions. 

Time Warner (TWX) unveiled plans to take a 31% stake in Central European Media Enterprises (CETV), sending shares of the European broadcaster surging. The deal is worth $241.5 million.

World Markets

European markets stayed hot as London's FTSE 100 ended in the green for the third straight day, picking up 2.86% to end at 3952.81. Germany's DAX extended its win streak to four, rising 2.65% to 4176.37. 

In Asia, Japan's Nikkei 225 jumped 3.39% to 8215.53 while Hong Kong's Hang Seng gained 4.78% to 13447.42. China's Shanghai Composite rallied for the sixth straight day, rising 1.95% to 2325.48.