Stocks rose in early trading, extending a big rally from Friday.

While the markets anticipated late last week that some sort of rescue was likely, investors appeared emboldened by the US government's decision late Sunday to invest US$20 billion (S$30.3 billion) in Citigroup and guarantee US$306 billion in risky assets.

The move by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. is only the latest effort this year to support a banking system troubled by bad debt and flagging confidence.

Besides implementing its US$700 billion bailout plan for the overall financial industry, the government has bailed out insurance giant American International Group Inc. and taken over lenders Fannie Mae and Freddie Mac.

The market is also a little more optimistic because President-elect Obama is set to introduce his economic team on Monday and has called for another economic stimulus. His plan targets saving or creating 2.5 million jobs during the next two years. Any plan is expected to exceed the US$175 billion Mr Obama proposed during the campaign.

The moves by the government to once again step in and help a troubled bank as well as the broader economy helped buoy investor sentiment but investors remain cautious. The US still faces a difficult economy and the stock market likely will continue to see volatility.

In the first hour of trading, the Dow Jones industrial average rose 86.82, or 1.08 per cent, to 8,133.24.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 11.28, or 1.41 per cent, to 811.31, and the Nasdaq composite index rose 16.95, or 1.22 per cent, to 1,401.30.

The rise in stocks follows a market surge on Friday that saw the Dow industrials jump 494 points, or 6.5 per cent. The other major indexes also rose sharply. Still, for the week, stocks ended lower after heavy selling Wednesday and Thursday. -- AP