NEW YORK — Wall Street had another extraordinary rally yesterday as investors stormed back into the market, relieved that the government plans to restore calm to the financial system by rescuing banks from billions of dollars in bad debt.

The government's proposal, while still a work in progress, has placated investors who worried that a continuum of bad bets on mortgages would hobble more financial companies and cause further damage to the banking system and the overall economy.

Analysts said it was the first government response decisive enough to restore confidence in the markets; in the past, it has relied largely on steps like injecting cash into the banking system that, at least until now, had a limited impact.