NEW YORK » Wall Street put a stop to a terrifying decline and stormed higher yesterday as President-elect Barack Obama appeared ready to tap the chief of the New York Federal Reserve as the next treasury secretary and hand him the herculean task of righting the U.S. financial system.

The Dow Jones industrial average, which had broken even for the day until news of the nomination leaked about an hour before the close, raced upward and finished 494 points higher, a rally of more than 6 1/2 percent.

The outbreak of buying pushed the Dow above 8,000—a figure that would have seemed like a nightmare three months ago but yesterday was a relief for Americans who have watched their investments and retirement savings drain away with alarming speed.

The turnaround came when word reached Wall Street that Obama was likely to nominate New York Fed president Timothy Geithner, 47, for treasury secretary. Geithner would assume top responsibility for tackling what threatens to be the deepest recession in a generation.

Elsewhere, the government continued its efforts to shore up the financial system. The Federal Deposit Insurance Corp. also said it would guarantee up to $1.4 trillion in U.S. bank debt for more than three years as part of the government's financial rescue plan.

“;Something needed to be done on the economy,”; said Ben Halliburton, chief investment officer at Tradition Capital Management. “;The fact that they've got the team together, maybe that is going to shorten the period of indecision.”;

The decision is aimed at breaking the logjam of bank-to-bank lending. The health of the economy depends on the free flow of credit, and credit markets cinched up again as the market plunged earlier this week.

Yesterday's rally managed to prevent the week from being one of the few most dismal in Wall Street history. Corporate mainstays running the gamut from Gap Inc. to Alcoa Inc. and Walt Disney Co. to Microsoft Corp. surged by double-digit amounts.

The Dow finished at 8,046, and the S&P just a hair over 800.

But the S&P is still down 46 percent so far this year, the most since 1931. And there was still plenty to be concerned about. Citigroup stock took another huge hit—down 20 percent of what's left of its value, to close at $3.77—as pressure built on the bank to sell part or all of itself.

Investors have also worried about the fate of the Detroit Three automakers, which are perilously low on cash and asking Washington for more help. But lawmakers have likely put off a vote on whether to extend a lifeline until next month and have asked the automakers for detailed plans about how they would use the money.

Bond prices fell yesterday as credit markets eased somewhat following a freeze-up Thursday.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.20 percent from 3.00 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.04 percent from 0.01 percent late Thursday.

Light, sweet crude for January delivery rose 51 cents to settle at $49.93 a barrel on the New York Mercantile Exchange. The dollar fell against other major currencies, while gold prices rose.