Stocks Close Higher as Bailout Nears

Updated from 4:08 p.m. EDT

Stocks in New York maintained their gains into Thursday's close as a bailout for financial firms appeared ready to quickly pass through Congress.

The Dow Jones Industrial Average ended up 196.89 points, or 1.8%, at 11,022.06, and the S&P 500 climbed 23.31 points, or 2%, to 1209.18. The Nasdaq added 30.89 points, or 1.4%, to 2186.57.

On Wednesday, the three major indices finished narrowly mixed after a day of erratic trading. Investors were focused on Treasury Secretary Henry Paulson's $700 billion bailout plan for the financial sector.

On Thursday afternoon, lawmakers appeared ready to move forward with the bailout package, raising hopes that the bill be finalized by Friday.

"This crisis could result in a deflationary period, and that obviously would mean a prolonged, serious -- not recession, but depression," said Peter Cardillo, chief market economist at Avalon Partners. However, the bailout plan is not without a price tag, he said. "It means the printing presses at Treasury will be running on full cylinders," said Cardillo, which means inflation remains a concern, "but it's the lesser of the two evils."

Cardillo said that if the Treasury buys back troubled assets, it's a step toward returning confidence to the financial system. The $700 billion price tag, he said, indicates that the Treasury "themselves don't know how much is out there, so they're going to the higher end of what they believe will do the trick." He said that it's possible the plan could end up costing $300 billion or $400 billion, but the ultimate price is uncertain.

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