Bustling Bank Stocks Lift Market

Elsewhere, Thornburg Mortgage (TMA Quote), climbed 19.8% on word the beleaguered mortgage lender has succeeded in raising $1.35 billion in bonds, warrants and a "participation in certain mortgage-related assets." Thornburg said it will use the $1.15 billion in proceeds to pay off margin calls that had threatened its continued existence last month.

Also brightening the mood were positive nationwide manufacturing data from the Institute for Supply Management. The ISM index came in at a better-than-expected 48.6 in March, indicating a somewhat less severe contraction than the prior month's reading of 48.3. Economists were looking for 47.5.

"Any time you get any slightly better-than-expected news, it's the same as the writeoffs," said Stone. "There's a sigh of relief: 'the world's not ending today.'"

Home-construction spending, meanwhile, slowed its decline to just 0.3% in February, compared with the prior month's slide of 1.7%, according to the Commerce Department. The consensus had called for negative 0.9%.

As traders piled into equities, Treasury prices plummeted. The 10-year note was sinking 1-10/32 in price to yield 3.57%, and the 30-year bond was off 1-31/32 in price, yielding 4.41%.

Commodities also lost ground. Crude oil shed 60 cents to settle at $100.98 a barrel, and gold futures gave up $33.70 to $887.80 as the front-month contract turned over to June.

The U.S. dollar was strengthening significantly earlier in the day but dropped back to $1.5600 against the euro, a fraction worse than yesterday. The greenback erased its gains against the yen, as well, dipping 0.1% to 101.92.

Back on the corporate front, The Wall Street Journal reported that Microsoft (MSFT Quote) probably won't sweeten its $44.6 billion takeout bid for Yahoo! (YHOO Quote), according to people close to the company. Microsoft shares rose 4%, while Yahoo! dropped 1.5%.

Fellow tech name Dell (DELL Quote) tacked on 2% after saying it will close its Texas desktop-manufacturing plant as part of a three-year push ultimately to save $3 billion a year. The plan also includes more layoffs, as previously announced, which should in the end total at least 8,800.

In notable analyst actions, VMWare (VMW Quote) was simultaneously upgraded to outperform at Wachovia and cut to underperform at Credit Suisse. Shares of the software company ended up 6.8%.

Home-furnishing retailer Pier 1 Imports (PIR Quote) was upped to buy from hold at Deutsche Bank, bringing shares higher by 9.9%. Wachovia began coverage of Level 3 (LVLT Quote) with an underperform rating, and NYSE Euronext (NYX Quote) had its price target cut at Jefferies. Level 3 stock closed off 0.5%, but shares of NYSE were better by 7%.

The major overseas markets were climbing. In Asia, Tokyo's Nikkei 225 rose 1%, and Hong Kong's Hang Seng Index added 1.3%. European exchanges, meanwhile, revved up their gains amid the surge in U.S. shares. London's FTSE leapt 2.6%, Germany's Xetra Dax gained 2.8%, and the Paris Cac advanced 3.4%.