Stocks Take It Higher

Updated from 2:17 p.m. EDT

U.S. stocks roared higher Friday following reports that the government was creating a sweeping fix for the financial crisis. A moratorium on short-selling by the Securities and Exchange Commission lent additional support to the rally.

The Dow Jones Industrial Average was jumping 340 points to 11,360, and the S&P 500 gained 42 points to 1249. The Nasdaq added 51 points to 2250.

Financial stocks were off to the races. Names including Washington Mutual (WM Quote), Wachovia (WB Quote), Citigroup (C Quote) and Morgan Stanley (MS Quote) were all showing sizable double-digit gains.

Early Friday, the Treasury said it would offer $50 billion from its Exchange Stabilization Fund to insure money-market mutual funds. A number of such funds have lately been under fire thanks to investment in bad debt from bankrupt Lehman Brothers and flailing insurer AIG (AIG Quote).

The Federal Reserve also said it would build on its liquidity programs to assist money-market funds, by taking steps that include buying short-term debt issued by Fannie Mae (FNM Quote), Freddie Mac (FRE Quote) and the Federal Home Loan Banks.

Speaking at a press conference Friday morning, Treasury Secretary Henry Paulson said that government-sponsored entities Fannie Mae and Freddie Mac would continue to buy mortgage-backed securities and support the mortgage market. He also said that the Treasury will expand its program to purchase mortgage-backed securities. He said that the cost of government intervention would reach the hundreds of billions of dollars and the administration would work over the weekend to iron out details of the plan.

Bloomberg reported that Barclays (BCS Quote) estimated the government would need to borrow an additional $700 billion to $1 trillion to pay for the recent spate of financial-sector bailouts it has undertaken.