Updated from 4:22 p.m. EDT

Stocks in New York enjoyed outsized gains Tuesday, rocketing ahead more than 5%, with financials leading the ascent.

The Dow Jones Industrial Average rose 379.44 points, or 5.8%, to 6926.49, and the S&P 500 moved higher by 43.07 points, or 6.4%, to 719.60. The Nasdaq was up 89.64 points, or 7.1%, to 1358.28.

"Of course we're in an oversold condition, but it's too early to say this is a bottom," says Peter Cardillo, chief market economist at Avalon Partners. "We can say it's a breath of fresh air."

All of the Dow's components gained. Shares of Bank of America ( BAC) and Citigroup ( C) added 27.7% and 38.1%, respectively, while JP Morgan Chase ( JPM) rose 22.6%. Financials in general got a bounce, with the KBW Banking Index rising 15.6%.

Citigroup chief Vikram Pandit offered some early reassurance to investors and the market, saying the bank has had a strong start to 2009. Nonetheless, U.S. officials are reportedly examining what new steps they might need to take to stabilize Citi if conditions worsen for the bank, according to a Wall Street Journal report, which called the talks "contingency planning."

The Treasury Department already has a 36% stake in the troubled U.S. bank, which dipped below $1 a share briefly last week.

"Pandit's comments are very encouraging," says Kenneth Roberts, a principal at Harbor Lights Financial. "But we're still in for a long, hard road."

The remarks came just before Federal Reserve Chairman Ben Bernanke spoke before the Council on Foreign Relations on the oversight of U.S. banks. Bernanke said the financial regulatory system on the whole must be overhauled, rather than simply focusing on individual troubled companies.

Bernanke also urged the governments of the world to take "coordinated and forceful action" to deal with the ongoing downturn.

Cardillo believes we're starting to see "some of the negative rhetoric from Washington change course a bit, and this market is starving for that." In particular, "Treasury Secretary Tim Geithner came out with a fairly strong statement yesterday saying that the plans that have been put in place will eventually help the economy."

Stocks got an added boost after CNBC reported that Rep. Barney Frank (D., Mass.) believes the uptick rule might be restored within a month. The uptick rule hasn't been in effect since 2007, and some market observers believe that has allowed unfettered short-selling to take down shares. Before the rule was repealed, a short sale could only come after a move higher in a security's price.

In corporate news, General Electric ( GE) surged after the company raised $8 billion in federally backed debt, easing investor fears about capital levels at its finance arm. Its shares added 19.7% to $8.87.

Another bright spot, AT&T ( T) said it would add 3,000 jobs in 2009 and invest $17 billion to $18 billion primarily to help its wireless and broadband businesses. Its shares moved up 9% to $23.60.

The rally followed a pullback Monday, a session in which Wall Street failed to advance despite news on a trio of mergers. Merck ( MRK) made a $41 billion bid for its cholesterol-drug partner Schering-Plough ( SGP), Dow Chemical ( DOW) and Rohm & Haas ( ROH) reached an agreement to merge by April 1, and Genentech ( DNA) and Roche are reportedly nearing a deal on Roche's prospective takeover.

On the tech side, Apple ( AAPL) added 6.6% to $88.63. The Mac maker could launch a netbook PC by the second half of this year, according to Dow Jones. The small, portable and lower-priced devices would compete with netbooks being marketed by Asus, Dell ( DELL), and Hewlett-Packard ( HP).

In commodities, oil lost $1.36 to settle at $45.71 a barrel, and gold fell $22.10 to $895.90 an ounce.

Longer-dated Treasuries were dropping. The 10-year note was losing 1-6/32 to yield 3%, and the 30-year was giving up 2-27/32, yielding 3.7%. The dollar was weaker.

Stocks overseas were largely higher. The FTSE in London and the DAX in Frankfurt rose 4.8% and 5.3%, respectively. In Asia, Hong Kong's Hang Seng lost 0.4%, but Japan's Nikkei moved up 3.1%.

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