NEW YORK » The optimism is building on Wall Street.

Financial stocks led Wall Street sharply higher yesterday on investor hopes the Obama administration will create banks to absorb the bad assets weighing down the financial system. The Standard & Poor's 500 index, a benchmark for the overall stock market, completed its first four-day rally since late November. And the Dow Jones industrial average jumped 201 points.

Financial companies surged on the notion that the government could take soured debt like defaulting mortgages off the hands of banks and place them in a so-called bad bank to hold toxic assets.

Bank shares jumped: Wells Fargo & Co. surged 31 percent, Citigroup Inc. jumped 19 percent and Bank of America added 13 percent.

The Dow industrials rose 200.72, or 2.46 percent, to 8,375.45.

Broader stock indicators also rose. The S&P 500 index jumped 28.38, or 3.36 percent, to 874.09. The index last recorded as many straight advances in a five-day run that ended Nov. 28.

The Nasdaq composite index rose 53.44, or 3.55 percent, to 1,558.34.

The Russell 2000 index of smaller companies rose 17.44, or 3.83 percent, to 473.02.

The number of stocks rising outpaced those that fell by more than 6 to 1 on the New York Stock Exchange, where consolidated volume came to 6.07 billion shares, compared with 4.66 billion traded Tuesday.

Bond prices tumbled as stocks gained. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.67 percent from 2.53 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.17 percent from 0.13 percent Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 58 cents to settle at $42.16 a barrel on the New York Mercantile Exchange.

Wells Fargo jumped $5, or 31 percent, to $21.19 after the company said it would maintain its dividend.

The company reported results that included write-downs to reduce is exposure to the risky assets of Wachovia Corp. Wells Fargo also added to its reserves for future losses.

Other banks charged higher on the notion that Washington could vacuum up some of their bad debt. Citigroup Inc. rose 66 cents, or 19 percent, to $4.21, while Bank of America Corp. rose 89 cents, or 14 percent, to $7.39. State Street Corp. surged $6.15, or 31 percent, to $25.77.