NEW YORK - A stock market gaining in confidence shot higher for a second straight session yesterday as investors bet that President-elect Barack Obama's plans to increase spending on public works projects will help lift the economy back to health. The major market indexes jumped more than 3 percent, and the Dow Jones industrials' nearly 300-point advance gave the blue chips their highest close in a month.

The rally, which gave the Dow a two-session gain of almost 560 points, extended a period of relative tranquillity on Wall Street. The Dow and the Standard & Poor's 500 have risen in nine out of 11 sessions as investors have absorbed bad economic news without signs of the panic that rocked the market for much of the fall.

Some observers contend that the market is slowly forming a bottom. Stocks are up sharply from Nov. 20, when the benchmark S&P 500 finished at its worst level since April 1997. Since then, the S&P 500 is up 20.9 percent, the Dow is up 18.3 percent, and the Nasdaq is up 19.4 percent.

Obama's plan calls for the largest U.S. public works program since the creation of the interstate-highway system a half-century ago. That could bolster the economy by putting thousands of people to work building schools and other construction projects.

His weekend announcement gave a lift to a range of companies, from machinery-makers to materials producers. Alcoa Inc., the world's third-largest aluminum producer, surged 18 percent on the news; while heavy-equipment-maker Caterpillar Inc. jumped 11 percent.

Investors also grew more confident as the government neared a deal to dole out billions to America's three biggest automakers. The White House said yesterday that it was "very likely" to strike an agreement with Congress on funneling money to General Motors Corp., Chrysler L.L.C. and Ford Motor Co. The package is expected to total about $15 billion.

The stock market has become more optimistic, although a number of reports last week seemed to indicate the recession is showing no signs of weakening.

"I think people recognize that the government is going to throw everything that they can at this market, everything they can at the economy to make it work," said James Cox, managing partner at Harris Financial Group.

Still, many analysts, cognizant of the fact that recoveries from bear markets tend to be tumultuous, were still extremely cautious despite the market's recent string of gains.

"My gut feeling is investors aren't going to quite believe this rally, and there is probably going to be some profit-taking," said Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc.

The Dow rose 298.76, or 3.46 percent, to 8,934.18, its highest close since it finished at 8,943.81 Nov. 7. The blue-chip index, which added 259 points Friday, is now up for December.

Broader indexes also rose. The Standard & Poor's 500 index advanced 33.63, or 3.84 percent, to 909.70; and the Nasdaq composite index jumped 62.43, or 4.14 percent, to 1,571.74.

The Russell 2000 index of smaller stocks rose 20.29, or 4.40 percent, to 481.38.