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Wall Street celebrated Columbus Day with a 330-point buying binge on the Dow as traders around the world breathed a sigh of relief that European leaders pledged to bolster their banks and the markets look ahead to the start of earnings season.

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The Dow Jones Industrial Average soared 330.06 points, or 2.97%, to 11433.18, the Standard & Poor’s 500 jumped 39.43 points, or 3.41%, to 1194.89 and the Nasdaq Composite leaped 86.70 points, or 3.50%, to 2566.05. The FOX 50 gained 28.49 points, or 3.38%, to 872.36.

While bond markets in the U.S. were closed for the holiday, the bulls on Wall Street did anything but stay home, sending the blue chips to their biggest one-day point gain since August 11. Rallying for the fourth time in five sessions, the benchmark index has surged about 775 points over the past week amid signs Europe is finally racing to get its debt debacle under control before it sends the U.S. to a double-dip recession.

“I think market sentiment has shifted to a modestly positive tone. Current pricing is, frankly, relatively cheap relative to what earnings should be,” said Peter Kenny, managing director at Knight Capital. Kenny also said, “The tone out of Europe has become a lot more constructive over the last week or so” thanks to “pretty aggressive, very proactive policy initiatives spearheaded by both France and Germany.”

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Over the weekend German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to take action before the end of October to fix the continent’s debt mess and shore up their banks. The leaders of the two largest euro-zone countries said they are close to a deal to recapitalize embattled European lenders. However, Merkel and Sarkozy stopped short of laying out specifics of a plan.

Because of Europe’s ties to the global financial and economic systems, the deepening sovereign debt crisis has hurt stocks and growth around the world in recent months.

In another sign Europe is attempting to get the crisis under control, France and Belgium quickly teamed up to nationalize and break up municipal lender Dexia, which had been teetering on the verge of collapse due to its enormous exposure to Greek bonds. Dexia, which appears to be the first banking victim of the current crisis, quickly reached a deal to receive $121 billion in state guarantees and sell its Belgium unit to the government for $5.4 billion.

“They weren’t playing games with that. It wasn’t dragged on, for a change,” said Kenny.


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