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NEW YORK (CNNMoney.com) — Stocks rallied Monday as investors welcomed President-elect Barack Obama’s plan to create jobs and revive the economy, and reports that government help for the automakers is on the way.

The Dow Jones industrial average (INDU) jumped 298 points, or 3.5%. During the session, the Dow gained as much as 391 points and topped 9,000 for the first time in a month. The Dow has risen in nine of the last 11 sessions.

The Standard & Poor’s 500 (SPX) index added 3.8% and the Nasdaq composite (COMP) gained 4.1%.

“We’re in a very unsettled period where people’s opinions swing between hope and fear on very little news,” said Ken Kam, portfolio manager of the Masters 100 (MOFQX) Fund. “Right now we are seeing the impact of the hope that maybe the worst is over.”

Over the weekend, Obama outlined plans to create 2.5 million jobs by 2011 through repairing roads and bridges, modernizing schools and making public buildings more energy efficient, among other initiatives.

Additionally, the White House said a deal to help the automakers is near. The Bush administration is reportedly considering a Congressional plan that would make up to $15 billion in loans available as soon as Dec. 15.

Stocks surged Friday, erasing morning losses after a brutal November employment report, as investors extended the recent trend of buying despite bad news.

That turnaround was key, said Dave Hinnenkamp, CEO at KDV Wealth Management. “We had bad news and the market rallied anyway.”

That trend has been in place for the last few sessions and seemed to continue Monday, putting a floor under the stock market.

“The bottoming process is taking place,” Hinnenkamp said. He said that the market has priced in a lot of gloomy news and that the lows hit in late November were significant.

Between closing at an all-time high on Oct. 9, 2007, and the recent closing low on Nov. 20, the S&P 500 plunged 52%.

As of Monday’s close, stocks have rallied 21% off that November low. While that trend is encouraging, markets are going to remain volatile for some time, with the economic news expected to get worse before it gets better.

Kam said that it’s too soon to see the recent upswing as anything other than a bear-market rally. Nonetheless, it is still a positive development.

After the close, package delivery firm FedEx (FDX, Fortune 500) warned that fiscal 2009 earnings won’t meet earlier forecasts due to the impact of the slowing economy. The company – seen as an indicator of the broader economy – also said that it sees second-quarter earnings hitting the high end of its previous forecast. Shares lost 8% in extended-hours trading. Competitor UPS (UPS, Fortune 500) slipped 5% in sympathy.

Automakers: Reports first surfaced late Friday that Congress and the White House are working on a $15 billion to $17 billion loan package for the Big Three automakers. The proposed loan is short of the $34 billion GM, Ford and Chrysler asked for last week, but would be enough to tide Detroit’s automakers over until at least the end of the first quarter of next year. The idea is that this would give the new administration time to come up with a longer-term solution.

Meanwhile, President-elect Obama and others in Congress are suggesting a change at the top may be needed. (Full story)

GM (GM, Fortune 500) shares gained 20.8%, while Ford Motor (F, Fortune 500) rose 24%.

Obama on the economy: Investors also responded to the President-elect’s comments over the weekend. Saying that America is facing a financial crisis that is going to get worse, the priority is to create a recovery plan that is equal to the task.

He told NBC’s “Meet the Press” that the priority will be to create an economic stimulus plan that is big enough to actually help the economy, even if it means expanding the deficit in the short term.

Company news: Dow Chemical said it will cut 5,000 full-time jobs, or around 11% of its workforce, close 20 plants and sell several businesses to cut back amid the recession. However, Dow (DOW, Fortune 500) shares gained 7%.

3M (MMM, Fortune 500), a Dow component, cut its 2008 profit outlook and also said 2009 results won’t meet estimates. Over the weekend, the company said it is cutting 1,800 staffers worldwide. Shares lost 4%.

Anheuser-Busch said it will cut 1,400 jobs, or about 6% of its workforce, with most of the reductions due by the end of the year. The maker of Bud was bought by Belgium’s InBev last month in a $52 billion deal.

Last week, AT&T (T, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and other companies announced more than 40,000 job cuts.

In other news, media company Tribune Co. has filed for bankruptcy protection, due to mounting debts.

Among other stock movers, financial shares jumped, including American Express (AXP, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), JP Morgan Chase (JPM, Fortune 500), Merrill Lynch (MER, Fortune 500) and Goldman Sachs (GS, Fortune 500).

Dow stock Alcoa (AA, Fortune 500) and other metal and mining stocks advanced along with the price of the underlying commodities.

Dow stock Caterpillar (CAT, Fortune 500) rallied 10.9%. The heavy-equipment maker is one of the companies that would benefit from Obama’s infrastructure plan.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by over three to one on volume of 1.74 billion shares. On the Nasdaq, advancers topped decliners by over five to two on volume of 2.35 billion shares.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.74% from 2.70% late Friday. The 10-year yield dipped below 3% last month for the first time since the note was first issued in 1962. Treasury prices and yields move in opposite directions.

The yield on the 3-month Treasury bill stood at 0.015%, unchanged from late Friday and near the 68-year low of zero hit last month. The bill is seen as the safest place to put cash in the short term. The low yield means investors would rather preserve cash despite little or no interest than risk it in the stock market.

Lending rates improved modestly. The 3-month Libor rate held steady at 2.19%, unchanged from Friday, according to Bloomberg. The overnight Libor fell to a record low of 0.19% from 0.28% Friday. Libor is a key bank lending rate.

Other markets: Markets around the globe rallied on bets that world economies will continue to take steps to get their economies moving forward again. In Asia, the Japanese Nikkei rallied 5.2% and the Hong Kong Hang Seng gained 8.7%. In Europe, the London FTSE jumped 6.2%.

The dollar declined versus the yen and gained against the euro.

U.S. light crude oil for January delivery rallied $2.90 to settle at $43.71 a barrel on the New York Mercantile Exchange, after ending the previous session at a four-year low.

COMEX gold for February delivery jumped $17.10 to settle at $769.30 an ounce.

Gasoline continued its fall to nearly four-year lows, with prices down 1.7 cents to a national average of $1.716 a gallon, according to a survey of credit-card swipes released Monday by motorist group AAA. Prices have been sliding for 2 1/2 months and have dropped more than $2 a gallon, or 55%.