New York  - US stocks posted their largest rally of the year on Tuesday, following the lead of European markets after troubled banking giant Citigroup Inc said it was experiencing its best quarter since 2007.

Citigroup's chief executive Vikram Pandit said in an internal memo that the company was profitable in the first two months of 2009 after five straight quarters of losses, Bloomberg News reported.

Shares of Citigroup - which has accepted 45 billion dollars in emergency government loans - rose 38 per cent on the news, or 40 cents per share, to close at 1.45 dollars. Wider financial stocks surged 16 per cent amid speculation that the worst of the financial crisis may be over.

Federal Reserve Chairman Ben Bernanke outlined a broad overhaul of financial regulations Tuesday and repeated his conviction that US efforts to stabilize the financial system could spark an economic recovery by the end of 2009.

The blue-chip Dow Jones Industrial Average surged 379.44 points, or 5.8 per cent per cent, to 6,926.49. The broader Standard & Poor's 500 Index jumped 43.07 points, or
6.37 per cent, to 719.60. The technology-heavy Nasdaq Composite Index rocketed up 89.64 points, or 7.07 per cent, to 1,358.28.

The US currency dropped against the euro to 78.86 euro cents from 79.34 euro cents on Monday. The dollar slipped against the Japanese currency to 98.59 yen from 98.8 yen. dpa