NEW YORK — Wall Street stormed back after its worst week ever and staged the biggest single-day stock rally since the Great Depression on Monday, catapulting the Dow Jones industrials to a 936-point gain and finally offering relief from eight consecutive days of stock market carnage.

While no one was saying the worst was over for the staggering financial system or troubled economy, buyers returned to the stock market with gusto, with some saying stocks had been driven down to fire-sale prices.

The surge came as executives from leading banks were summoned by the Bush administration to Washington to work out a plan to get loans, the lifeblood of the economy, moving again. And it followed signals that European governments would put nearly $2 trillion on the line to protect their own banks.

The Dow gained more than 11 percent, its biggest one-day rally since 1933, and by points it shattered the previous record for a one-day gain of 499, during during the waning days of the technology boom in 2000.

“My screen is completely green, and I love that,” said John Lynch, chief market analyst for Evergreen Investments in Charlotte, N.C. “But I’m not doing any backflips yet. We still have many challenges up ahead.”

Stocks opened sharply higher and never looked back. The Dow was up more than 400 points in the opening minutes of trading, and by lunch hour had crossed back through the same 9,000 level it crashed below last week.

The rally intensified in the final hour of trading. In the moments before the closing bell rang, boisterous traders sounded horns on the floor of the New York Stock Exchange, and raucous applause broke out.

“I would say this is closer to the bottom. I can’t say this is the bottom,” said Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa. “I think it’s more relief, the rally today.”

From wsj.com

Markets continued to resemble a listing ship in a storm, with officers furiously bailing water but unable to control when the punishing wind and rain will pass. The storm just has to do that on its own.

Officials around the world have taken unprecedented steps recently to shore up the global financial system, but confidence remains low and, according to many analysts and traders, that has become an increasingly self-fulfilling problem largely beyond officials’ control. Each day’s stock-market drop sparks worries that fuel the next’s, and each day of high borrowing costs between banks is interpreted as evidence that risks remain high, which props up the next day’s rates.

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That stomach-churning pattern continued Thursday as an early 190-point rally in the Dow Jones Industrial Average evaporated, leaving the blue-chip measure on the verge of a seventh straight daily loss. It was down more than 300 points in recent trading, falling below the 9000 mark.

The Dow has plunged nearly 15% during its losing streak so far, and is down 35% from its record finish a year ago.

Peter Cardillo, chief market economist at Avalon Partners, said the 9000 level, could prove to be an important testing ground for whether the broader crisis of confidence has run its course. If the market holds there, as Mr. Cardillo expects it might, the market could begin to build a more sustained rally. But if it breaks through that round number by a significant amount, the bloodletting could continue for days longer, at least.

“It’s getting to a point where it’s every man for himself,” said Mr. Cardillo. “When fear reaches that level, you’re getting close to a bottom. But we’re clearly not there quite yet.”

Among the Dow’s components, General Motors shares were down by 15% in recent trade.

Analysts said that trading has been marked by skepticism that recent actions by regulators world-wide are adequate to stanch the credit crisis. Investors aren’t yet convinced that vast sums of government money will convince banks to start lending again.

“Psychology is not allowing what the economics textbook says should happen to actually happen,” said strategist Doug Peta, of the New York portfolio-management firm J. & W. Seligman & Co.

In particular, Mr. Peta and other Wall Street pros say the stock market is unlikely to make a sustained rebound until the interbank-lending market loosens – a scenario that remained elusive despite Wednesday’s global rate cut and speculation that more easing may be on the way.

According to data from the British Bankers’ Association, overnight U.S. dollar Libor fell to 5.09375%, against Wednesday’s fixing of 5.375%. But longer-term funding pressures tightened. The key three-month Libor rate rose to 6.28125% from 6.27125%, and the one-month rate climbed to 6.08688% from 6.075%.

Those rates are key to setting the prices of credit that banks charge their clients, including companies whose activities drive growth in the broader economy.

“Every single business in the world needs working capital,” said Mr. Peta. “You need to spend money to make something before you can sell it, which is what generates your profits, which is what drives the stock market. That’s why the stress in short-term funding is the crux of the market’s problem right now.”

Other major stock yardsticks were lower. The technology-focused Nasdaq Composite Index fell 0.8% to trade at 1727. The small-stock Russell 2000 tumbled 1.9% to 536. The S&P 500 shed 2.1% to trade at 964, led by a decline in its energy sector, off 8%. The S&P financials fell 5%.

Strategist Jim Paulsen, of Wells Capital Management in Minneapolis, said the fear that has gripped the market in recent days may be an unintended, self-fulfilling consequence of recent efforts in Washington to pass a $700 billion rescue of firms saddled with soured credit bets.

“To sell the bailout to the public, everyone from the President on down had to go out and tell people how bad everything was, that the world was coming to an end,” said Mr. Paulsen. “Ever since, people’s expectations about the economy have gotten worse and worse and worse, and their reaction to each new action to fix the problems has gotten worse and worse and worse.”

Morgan Stanley was down 20%. The firm has slid recently despite assurances from the company and Japanese investor Mitsubishi UFJ Financial that a capital injection is going through.

“For [Morgan Stanley and GM], it remains credit issues,” said Sveinn Palsson, equity derivatives strategist at Credit Suisse. “People are worried how the credit squeeze is affecting the economy and these companies are at the heart of that.”

Another company highly dependent on free-flowing credit markets — student-loan giant SLM — was lower by 16% in recent trading.

Extreme intraday volatility in the stock market has been scaring away buyers, traders say. Many point to the Securities and Exchange Commission’s ban on short selling of financial stocks — bets made with borrowed stock that prices will decline — as one reason for the big swings. Some traders said that some of the declines in Morgan Stanley and GM, both of which were covered under the ban, could have been due to the ban’s end.

Energy stocks were also weaker amid a continuing decline in crude-oil prices. Chevron, a Dow component, was down by 5% in recent trading. The front-month crude-oil futures contract was down almost two dollars in recent trade, leaving oil just above the $87 a barrel mark. Oil prices have deteriorated as the credit crisis has inflamed worries about a global recession and subsequent drop in demand for fuels.

Other commodity prices have also suffered. The broad Dow Jones-AIG Commodity Index edged down 0.1%.

Long-term Treasury prices fell. The 10-year note shed 1-2/32 to yield 3.785%. The 40-year bond was off 1-16/32, yielding 4.121%.

The dollar strengthened against major overseas rivals. The euro cost $1.3654, down from $1.3667 late Wednesday. One dollar fetched 100.96 yen, up from 99.84 yen.

—Geoffrey Rogow and Rob Curran contributed to this article

Write to Peter A. McKay at peter.mckay@wsj.com.

Quoted from WSJ

China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.

The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said that the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.

Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.

The introduction of a tool like short selling runs counter to the trend in many markets in the U.S., Europe and other parts of Asia, where regulators have limited the practice. Some companies have blamed short selling for contributing to the lack of confidence that has driven the credit crisis and forced many financial companies to find suitors, seek more capital or file for bankruptcy protection. It is unclear why Chinese regulators are acting now, but the move suggests that the world’s credit crisis hasn’t derailed some of their basic plans to reform.

The decision also suggests Beijing’s policy makers believe a recent effort to boost the market put a floor under the prices of key stocks and lessened the risk that short-sellers might weigh heavily on prices. The government last month pledged that state agencies would buy stock in major listed banks and companies. Officials may have delayed the introduction of short selling during last year’s market rally on concern it could raise the likelihood of a crash.

China’s market structure currently permits investors little leeway to protect themselves from the possibility of a market fall. Local market analysts have said short selling and other hedging measures would give investors another way to prepare for a falling market. Currently, the only option is to sell and walk away.

The Chinese stock market has endured two major boom-bust cycles in about a decade, with the Shanghai Composite Index falling as much as 60% this year before staging a modest bounce in recent weeks. The existence of products permitting investors to bet on a market fall, proponents of such products say, would have taken some of the steam out of the market as it was rising.

The Shanghai index, which was closed last week due to a national holiday, finished Sept. 26 at 2293.78, down 16% for the third quarter, its fourth straight quarterly drop. The market is down 56% since the beginning of the year.

Sunday’s announcement suggests a modest introduction aimed at select brokers, not a new product for the mass of retail investors who do most of the trading on China’s markets. The announcement also made no mention of the possibility of the introduction of stock index futures, a product that is also used for hedging against risks that has been discussed by regulators repeatedly in recent years.

Traders and analysts in recent weeks have speculated that China would likely allow margin lending and short selling soon. Shares of some listed brokerages have risen on hopes that the new businesses would improve their fee income. Brokers’ stocks have also been helped as China’s markets have rebounded from their September lows following news that Chinese government agencies would buy shares of listed companies on the open market.

In August 2006, China’s two stock exchanges issued rules on margin lending and short selling, stipulating the maturity and size of the margins and the stocks in which margin trading and short selling would be allowed. But regulators delayed approving securities firms for margin trades because of concern the new business would add to market turbulence.

Write to J.R. Wu at jr.wu@dowjones.com and James T. Areddy at james.areddy@wsj.com

Quick summery:

1. The Dow Jones Industrial Average, which had posted a loss of less than 300 points heading into the House vote, posted a decline of nearly 700 points as the “nay” votes reached a majority. In recent action, the Dow was off more than 490 points, or 4.4%, at 10659.19, down nearly 7% since crisis erupted a few weeks ago on Wall Street following the meltdown of Lehman Brothers Holdings.
2. The S&P 500 was recently down 5.5% to 1146.80. All of the broad measure’s sectors traded lower, led by a nearly 8% slide in its financial category.
3. Oil futures dropped slid almost $8, trading under $100 a barrel in New York as fears about slowing demand due to global economic weakness gripped the commodity markets. The broad Dow Jones-AIG Commodity Index slid more than 4%.

One good news, iPhone price will be dropped. Apple’s shares recently were down 15% at $108.66 on the Nasdaq Stock Market, leading a broad sell off in technology stocks. n its report, Morgan Stanley cited recent negative data such as a string of Macintosh computer and iPhone order cuts and signs of pricing pressure heading into the holiday season. Not good for me, since I just got one.

Wall Street lives on as a capitalist symbol, but the new inhabitants of its bricks and mortar have reduced its reality to an echo.

OK, finally, DJIA

• September 11, 2001 attacks,  the Dow fell 684.81 points, or 7.1%.

• The largest one-day percentage drop since 1914 occurred on “Black Monday“, October 19, 1987, when the average fell 22.61%.
• The largest one-day percentage gain since the 1930s, 10.15%, occurred two days later on Wednesday, October 21, 1987 bringing the Dow back above 2,000 and in line for a yearly gain.
• The largest one-day point gain in the Dow, an advance of 499.19, or 4.93%, occurred on March 16, 2000, as the broader market approached its top.

The Dow Jones Industrial Average (NYSE: DJI), also called the DJIA, Dow 30, or informally the Dow Jones or The Dow) is one of several stock market indices created by nineteenth-century Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow. Dow compiled the index to gauge the performance of the industrial sector of the American stock market. It is the second-oldest U.S. market index, after the Dow Jones Transportation Average, which Dow also created.

The average consists of 30 of the largest and most widely held public companies in the United States. The “industrial” portion of the name is largely historical—many of the 30 modern components have little to do with traditional heavy industry. The average is price-weighted. To compensate for the effects of stock splits and other adjustments, it is currently a scaled average, not the actual average of the prices of its component stocks—the sum of the component prices is divided by a divisor, which changes whenever one of the component stocks has a stock split or stock dividend, to generate the value of the index. Since the divisor is currently less than one, the value of the index is higher than the sum of the component prices.