However, many analysts said the bailout of the United States' two biggest mortgage finance companies, which could be the government's costliest ever, was a symptom of the dismal state the credit markets still were in after a year of crisis. Stocks mostly advanced as investors put down bets that a recovery in the financial and housing sectors is in the offing following the US government's move to bail out mortgage giants Fannie Mae and Freddie Mac. The Dow Jones industrials gained more than 150 points but the technology-heavy Nasdaq composite index declined.

The immediate reaction on the mortgage front was favorable. Mortgage rates fell in the hope that now that the government was standing behind Fannie and Freddie, they would be able to continue providing ample funds for home loans and bolster the ailing housing market. Thirty-year home mortgage loan rates fell about a half percentage point from Friday to 6 percent, according to Bankrate.com.

In the financial markets, stock prices around the world surged as hopes rose that the US Treasury's plan to take control of the companies — which together back about half of the country's $12 trillion in home mortgages — might put at least a temporary floor under troubled financial markets.

Shares in the twin mortgage companies themselves plunged, while their debt soared as investors bet the action would wipe out stockholders but fully guarantee their bonds. "The Treasury's announcement that it will place the government sponsored enterprises into conservatorship and purchase agency mortgage-backed securities is a very positive step for the housing market and the broader economy," said Jan Hatzius, economist at Goldman Sachs.

The Dow Jones industrial average surged 1.7 percent but Fannie Mae's and Freddie Mac's stocks got hammered, losing more than 80 percent of their value and trading below $1 a share.

The take-over came as worries heightened over shrinking capital at the congressionally chartered companies, which had combined losses of nearly $14 billion the last four quarters.

Large holders of their debt, including overseas central banks, had shown increasing nervousness. The take-over came as welcome news to China and Japan, the biggest buyers of the two companies' bonds, who praised Washington for its rescue for the mortgage giants.