NEW YORK — U.S. stocks on Tuesday celebrated the start of a new quarter, rallying as Lehman Brothers' equity offer drew a warm reception, fueling the Dow to its eighth-biggest point jump ever.

"Clearly there is a recognition the credit markets are healing — usually stocks begin to rally about six months before the end of a slowdown," said Jeffrey Kleintop, chief market strategist at LPL Financial Services.

"And with earning season less than a week away, and we haven't heard a flood of negative pre-announcements," Kleintop said.

The Dow rose 391.47 points, or 3.2 percent, to 12,654.36. It marked the third time in two weeks it came close to or surpassed 400 points.

Microsoft, one of the 30 Dow stocks, gained $1.12 to close at $29.50 a share. Boeing, also a Dow stock, advanced $1.51 to $75.88.

Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 47.48, or 3.6 percent, to 1,370.18 — the index's best start to a second quarter since 1938. And, the Nasdaq composite index rose 83.65, or 3.7 percent, to 2,362.75.

The stock indexes solidified gains after U.S. economic data showed the Institute for Supply Management's index inching up to 48.6 percent last month from 48.3 percent in February, topping the forecasts of analysts looking for it to slip to 47 percent.

The early economic data fostered the sentiment that says, "Hey, we're not falling through the floor on economic data," said Bill Stone, chief investment strategist at PNC Wealth Management. "You'll probably continue to see weak economic data, but that doesn't necessarily doom you to poor stock-market returns."

Impressive gains

A big positive behind the impressive gains on Wall Street is the favorable reception to Lehman's offering. "It's three times oversubscribed; people are interested in investing in Lehman," said Art Hogan, chief market strategist at Jefferies.

"Investment banks are losing money and need to raise money in the capital markets, and fortunately they are doing it," said Hugh Johnson, chairman of Johnson Illington Advisors.

Shares of Lehman added 17.8 percent after the company announced plans to offer $4 billion in convertible preferred shares.

"The thought being if you can raise the capital and take care of things, it takes off the table the collapse worries," Stone said.

Gains for UBS shares

UBS shares gained 14.6 percent after the company disclosed $19 billion in new write-downs and said that it would issue another $15 billion in shares.

Germany's Deutsche Bank reported a $3.9 billion write-off, mostly on leveraged loans, commercial real estate and alt-A exposures.

"It's not just a U.S. problem; it's the European banks' turn to say, 'Yeah, we had a little exposure there too,' " said Hogan, who also pointed to an index showing confidence among Japanese manufacturers at a four-year low as a way of putting U.S. economic woes in perspective.

In addition to hopes about the financial sector, Wall Street was relieved to see the feeble dollar regain some strength against the euro.

The euro fell to $1.5601 from $1.5785 late Monday in New York.

And there was also optimism that commodities prices, which have hit historic highs in recent months, have begun to retreat.

Crude fell 60 cents to settle at $100.98 on the New York Mercantile Exchange after earlier falling below $100. Meanwhile, gold dropped back below $900 an ounce.

"This is a nice way to begin the second quarter," said Todd Leone, managing director of equity trading at Cowen. "All the financials are up big, and there's a sense that things are turning. We definitely have not seen the last of the credit crisis, but we're getting closer."

Compiled from MarketWatch and The Associated Press