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NEW YORK (Reuters) - Stocks snapped a five-day losing streak on Wednesday, with the Dow surging nearly 300 points on optimism that a government plan to rescue ailing bond insurers is taking shape and could prevent billions more in credit losses.

The market also drew support from growing confidence that aggressive interest-rate cuts by the Federal Reserve could help stabilize the economy and support the beleaguered banking sector.

Shares of insurers Ambac Financial Group Inc and MBIA Inc, which backstop many of the riskier bets banks and their customers have made in credit markets, surged 63 percent and nearly 36 percent, respectively.

News of a meeting between New York regulators, bond insurers and their customers lifted the market out of negative territory in late afternoon trading, pushing the Dow and S&P up more than 2 percent by the close. That marked a sharp turnaround from earlier in the day, when the Dow and the S&P were each down more than 2 percent.

"The speculation that mortgage insurers could potentially get a bailout helped the market stabilize. That was enough to get the market going. There was no real silver bullet news that came through," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

The Dow Jones industrial average was up 298.98 points, or 2.50 percent, at 12,270.17. The Standard & Poor's 500 Index was up 28.10 points, or 2.14 percent, at 1,338.60. The Nasdaq Composite Index was up 24.14 points, or 1.05 percent, at 2,316.41.

The New York State Insurance Department met with bond insurance counterparties and policyholders, spokesman David Neustadt said.

Ambac settled up at $13.01, up $5.04, while MBIA ended at $17, up $4.47, and the S&P financial index jumped 6.8 percent, its biggest one-day percentage gain in more than five years.

"That (bailout plan) combined with the Fed push was really enough to get the financials running," said Rick Meckler, president of broker-dealer LibertyView Capital Management in Jersey City, New Jersey.

Stocks started the day sharply weaker, with disappointing profit forecasts from Apple Inc and Motorola adding to worries about a recession and the outlook for the tech sector.

The Nasdaq was down more than 3 percent at one point, and, for the second day, the index briefly crossed the threshold of a bear market, which is defined as falling 20 percent or more from a recent closing high.

After Tuesday's closing bell, Apple forecast a quarterly profit below analysts' expectations and reported disappointing holiday-season iPod shipments. Apple's stock sank 10.7 percent to $139.07 on the Nasdaq.

Mobile phone maker Motorola Inc forecast a loss for the current quarter and said it expects a challenging year.

Motorola shares lost 18.4 percent to $10.05 and ranked among the biggest percentage losers on the New York Stock Exchange.

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