NEW YORK (Reuters) - US stocks surged and the dollar jumped yesterday on reports that President-elect Barack Obama has chosen his point person to combat the worst US economic crisis in 80 years, giving hope to deeply fearful markets.

Reports in the late afternoon that Obama will nominate Timothy Geithner, president of the New York Federal Reserve, as his Treasury secretary triggered a rapid turn in markets that were wallowing after the week's heavy sell-off in equities.

The dollar extended gains against the yen and US Treasury bond prices added to earlier losses after the reports on Geithner, whom investors view as highly qualified and knowledgeable about the economy and the ways of Wall Street.

Along with Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke, Geithner has been among the most visible officials trying to pull the United States out of its biggest economic slump since the Great Depression.

"I think it is a brilliant pick, for no other reason than that it creates continuity in the middle of one of the greatest crises to ever face this country," said William O'Donnell, head of US interest rate strategy at UBS Securities LLC in Stamford, Connecticut.

NBC reported that Obama was expected to announce his economic team on Monday in an effort to calm markets.

The news lifted a deep cloud of uncertainty that has been hanging over markets and helped offset fresh worries about the future of embattled US bank Citigroup.

The Dow Jones industrial average closed up 494.13 points, or 6.54 percent, at 8,046.42. The Standard & Poor's 500 Index surged 47.59 points, or 6.32 percent, to 800.03. The Nasdaq Composite Indexjumped 68.23 points, or 5.18 percent, to 1,384.35.

In a sign of the fear that had been hanging over Wall Street before the Geithner news, almost two out of every five stocks among the 3,241 issues that traded on the New York Stock Exchange slipped to fresh 52-week lows.

But by the end of the session, advancing shares beat decliners by almost two-to-one.

US Treasury debt prices plunged, with yields rebounding from historic lows, as traders booked profits on this week's unprecedented gains.

The benchmark 10-year US Treasury note fell 60/32 in price to yield 3.21 percent.

The two-year US Treasury note fell 9/32 to yield 1.1 percent. Yields and bonds prices move in opposite direction.

Oil rose after a seven percent slide on Thursday to settle at its lowest level since May 2005. US crude rose 51 cents to settle at $49.93 a barrel, while London Brent crude settled up $1.11 at $49.19 a barrel.

Earlier in Europe bourses suffered a broad sell-off, spurred by grim data on euro zone manufacturing.

European stocks fell for the seventh time in nine sessions, with pharmaceuticals the biggest drag. Utility shares and mobile phone companies were the next biggest drags to the FTSEurofirst 300 pan-European index.

Jitters over financial stocks knocked down banking shares, with Societe Generale down almost 14 percent.

Pharmaceutical stocks, which had been resilient over the past few weeks, took a beating with four of the top five contributors to the decline in the drug industry.

Sanofi-Aventis fell 10.3 percent, AstraZeneca 8.7 percent, GlaxoSmithKline 6.9 percent and Novartis 6.4 percent.

The FTSEurofirst 300 index of top European shares closed 2.6 percent lower at 760.97 points, and lost about 11.7 percent on the week.

Despite the euphoria about Geithner, analysts earlier warned that investor anxiety over the state of the global economy has hardly evaporated.

Investment bank Goldman Sachs forecast more pain, estimating real US gross domestic product would fall by five percent on an annual basis in the fourth quarter and unemployment would reach nine percent late next year.

Asian stocks overnight rebounded from five-year lows. The MSCI index of Asia-Pacific stocks outside Japan climbed 3.3 percent, while Japan's Nikkei average added nearly three percent.