Deal Chatter Props Up Stocks

Updated from 4:13 p.m. EST

Stocks had yet another back-and-forth session before closing higher Thursday amid rumors that a takeover could be close for embattled lender Countrywide Financial (CFC Quote - Cramer on CFC - Stock Picks) and suggestions from the Federal Reserve chairman that the central bank might ease again.

The Dow Jones Industrial Average swung in a range of 267 points and went out up 117.78 points, or 0.92%, at 12,853.09. The S&P 500 gained 11.20 points, or 0.79%, to 1420.33. The Nasdaq Composite advanced 13.97 points, or 0.56%, to 2488.52.

Over the last two sessions, the Dow has added 2.1%, and the S&P 500 is up 2.2%. The Nasdaq has risen 2%, but is still lower for the week after a sharp decline Tuesday.

The major averages were lifted in the afternoon following a report in The Wall Street Journal said that Bank of America (BAC Quote - Cramer on BAC - Stock Picks) is in advanced talks to acquire Countrywide. Shares of the lender surged 51.4% to end at $7.75.

"Obviously, this potential deal means that other lenders could be taken out, and that will bring more stability to the financial sector," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "Having much more capital will no doubt lessen the chances of further deterioration, and these finance names might be able to weather the storm."

Subsector indices measuring financial stocks reflected the news. The NYSE Financial Sector Index was up 1.5%, while the Amex Securities Broker/Dealer Index jumped 3.7%.

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