Global stock markets rallied for a second consecutive day after the US government agreed to rescue the beleaguered Citigroup (C) and as President-elect Obama introduced his administration’s new economic team, emphasizing the need for quick action to hasten an economic recovery and signaling that he may be willing to keep at bay higher taxes for the wealthy.

The MSCI Word Index has improved by 10.1% since the start of trading last Friday, whereas the MSCI Emerging Markets Index lagged somewhat and registered a more modest gain of 4.6%.

The table below shows the performances of various global stock markets over the past two trading days, as well as figures since the respective markets’ highs and for the year to date (all in local currency terms).

The Dow Jones Industrial Index rose by 11.8% on Friday and Monday – only the 13th time since 1896 that the Index has had a two-day winning streak with a gain of more than 10%, according to Bespoke. “In prior occurrences when the Dow had one of these rallies following long periods of declines (-30% over 200 trading days), the average returns were notably more positive. While the next day had typically been negative, over the next week and month the average returns improved significantly.”

One must be careful not to attach too much value to one- or two-day movements, but should also be cognizant of the fact that stock markets bounced off multi-year chart support levels near the 2002 lows.

I said the following in my “Words from the Wise” review on Sunday: “Oversold conditions are bound to result in rallies from time to time (and possibly around Thanksgiving), but these should not be trusted at face value. For a more lasting market turnaround to happen, I would like to see evidence of base formations on the charts, a 90% up-day, and relative outperformance by the financial sector.”

At the time of writing, no confirmation had been received on whether yesterday was a 90% up-day, but the market’s volume and breadth indicators were certainly was not too shabby. Although the past two days’ outperformance of financials (Financial SPDR +18.7%) and banks (Philadelphia Bank Index +18.3%) is encouraging, it is too early to mark a new trend as far as relative performance is concerned.