* TSX rallies 4 percent after huge drop on Monday
* Energy sector climbs 5.8 percent on stronger oil
* Hopes for U.S. bailout plan boost financial services (Adds details, analyst comments, updates figures)
By Cameron French
TORONTO, Sept 30 (Reuters) - The Toronto Stock Exchange’s main index jumped more than 4 percent on Tuesday, recouping more than half the previous day’s heavy losses, as energy issues got a boost from crude oil’s recovery, while hopes for a revived Wall Street rescue plan calmed investor nerves.
Following a near 7 percent tumble on Monday after U.S. lawmakers rejected a proposed $700 billion bailout for the financial sector, the recovery spanned all 10 TSX subgroups, led by a 5.8 percent surge in energy stocks and a 5.4 percent rise by financial issues.
“Optimism springs eternal I guess, and (the U.S. congressional vote) was pretty close. People probably feel that the next time around it will pass simply because the reasons to vote against it were pretty weak,” said John Kinsey, a portfolio manager at Caldwell Securities.
The S&P/TSX composite index .GSPTSE rose 467.83 points, or 4.15 percent, to close at 11,752.90.
Reports that U.S. lawmakers were working to revive the bailout plan drove crude up more than $4 a barrel to above the key $100 level, boosting companies such as Canadian Natural Resources (CNQ.TO), which rose 11.8 percent to C$73, and Nexen Inc NXY.TO, which gained 10.3 percent to C$24.70.
Plane and train builder Bombardier (BBDb.TO) jumped 12.9 percent to C$5.78, leading industrials up 4.5 percent.
Analysts said some of the bounce could be attributed to bargain hunters rushing in for quality stocks, and also to buying associated with fund managers rebalancing their portfolios ahead of the end of the quarter.
“Normally, when you have that big a selloff, you get some kind of snapback,” said Peter Chandler, senior vice-president at Canaccord Capital.
“We’ve got extreme volatility right now, and until we come out of the other end of this, that’s not going to change.”
For the month of September, the TSX composite index fell 15 percent.
Market volume was a brisk 552.2 million shares, valued at C$9.5 billion. Advancing issues outnumbered decliners 1,022 to 586.
The blue-chip S&P/TSX 60 index rose 30.89 points, or 4.57 percent, to 707.34.
U.S. stocks also reversed course sharply, as the Dow Jones industrial average .DJI leaped 485.21 points, or 4.68 percent, to 10,850.66, while the tech-heavy Nasdaq composite .IXIC gained 98.60 points , or 4.97 percent, to 2,082.33.
$1=$1.06 Canadian Reporting by Cameron French; editing by Rob Wilson