NEW YORK - Wall Street got the news it wanted on the economy's biggest problems - banks and housing - and celebrated by hurtling the Dow Jones industrials up nearly 500 points.

Investors added rocket fuel yesterday to a two-week-old advance, cheering the government's plan to help banks remove bad assets from their books and also welcoming a report showing an increase in home sales. Major stock indicators surged more than 6 percent, including the Dow, which had its biggest percentage gain since October.

"It's just hard to argue that there isn't an improvement in economic activity on the horizon," said Jim Dunigan, executive vice president at PNC Wealth Management.

The market's rise began two weeks ago on news that Citigroup Inc. was operating at a profit in January and February.

The National Association of Realtors' existing home sales report was overwhelmingly positive for investors although it showed a decline in home prices in February. The NAR said sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January. It was the largest monthly sales jump since July 2003. Investors are embracing any sign that a glut in homes for sale may be easing. Yesterday's data followed a dose of good housing news last week as housing starts for February came in much better than expected.

The Dow rose 497.48, or 6.8 percent, to 7,775.86, its highest finish since Feb. 13. The Standard & Poor's 500 index rose 54.38, or 7.1 percent, to 822.92. The Nasdaq composite index rose 98.50, or 6.8 percent, to 1,555.77.

The Russell 2000 index of smaller companies rose 33.61, or 8.4 percent, to 433.72.

Collapsing home prices and the damage they have caused banks are at the center of the economy's problems and are a major focus for the stock market. Banks have sharply curbed lending after becoming weighed down with loans that have gone bad, especially mortgages.

Investors had been largely disappointed in the government's efforts to restore the banks to health, but finally seemed encouraged by the long-awaited announcement of details for the bad-loan cleanup plan.

"The actions that we're getting from a policy standpoint are very helpful in removing the sand from the gears," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "That is going to be good for the financials."

Shares of the country's largest banks, which had been pounded earlier this year over concerns about their ability to weather the crisis, soared yesterday. Citigroup Inc. jumped 19.5 percent, and Bank of America Corp. added 26 percent.

Banks seen as being on better footing also posted big advances. JPMorgan Chase & Co. rose 25 percent, while Wells Fargo & Co. rose 24 percent.

Investors welcomed yesterday's report showing the rise in home sales, which was led by first-time buyers pouncing on deep discounts of foreclosures and other distressed properties. Analysts say it could be a nascent sign of recovery. But only weeks ago, traders might have dwelled on the 15.5 percent drop in median prices.

Oil rose $1.73 to settle at $53.80 a barrel and the dollar was mixed against other major currencies. Gold fell $3.70 an ounce to close at $952.50 on the New York Mercantile Exchange. The price of gold had risen in recent weeks as investors have worried about the faltering economy and a weaker dollar.