Stimulus Talk Prods Bulls; Dow Soars 413

Matthew Smith, vice president and portfolio manager at Smith Affiliated Capital, was less optimistic about the future of the credit markets. Even if rates have decreased, they're still high, and "the banks aren't willing to take someone else's paper in at this point," said Smith.

Part of the problem, said Smith, is that the Fed now pays interest rates on deposits. Banks now face two alternatives, he said: They can earn interest without risk by banking with the Fed, or they can earn a premium lending to other banks in a very risky environment.

"Once you establish that, there's no need for these banks to turn around and lend to each other when they're getting short-term interest from the Fed," said Smith.

Despite their recent declines, lending rates remained elevated, causing wrinkles in other companies' plans. The Journal reported that General Motors (GM Quote) was having trouble getting funding for a purchase of fellow automaker Chrysler. Shares ticked up 1.6% to $6.53.

Elsewhere, Merrill Lynch (MER Quote) CEO John Thain said he foresaw job cuts numbering in the thousands for the brokerage, which is slated to be bought by Bank of America (BAC Quote). Merrill shares added 6.5% to $19.32, and BofA tacked on 5% to $24.25.

Traders were also looking at a heap of quarterly corporate earnings statements.

Oil-services firm Halliburton (HAL Quote) swung to a $21 million loss related to a cash settlement of convertible debt, but beat estimates and said that its business would weather a downturn in oil drilling going forward. Shares rocketed 14% to $20.80.