US stocks rallied the most in two months on speculation lower borrowing costs and a plan to bail out bond insurers will restore confidence in the financial system.

Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp., the biggest U.S. banks, helped the Dow Jones Industrial Average erase a 326-point loss and sparked the biggest advance in financial shares in five years. Centex Corp. and D.R. Horton Inc. led a gauge of homebuilders to its steepest gain since 1994 on expectations the Federal Reserve’s surprise 0.75 percentage point rate cut yesterday will spur construction.

The Standard & Poor’s 500 Index, which had been off to its worst-ever start to a year, added 28.08, or 2.1 percent, to 1,338.58, its first advance in six days. The Dow average rose 298.98, or 2.5 percent, to 12,270.17. The Nasdaq Composite Index increased 24.14, or 1.1 percent, to 2,316.41. [MORE]