U.S. Stocks Work Higher in Rebound Move

The effect, said Pento, will be debt forgiveness for the consumer at the expense of the Fed's and Treasury's balance sheets. Such actions will hamper the government's ability to act to control inflation later, and the next time the economy faces crisis, there will just be more leverage to unwind, he said.

The alternative, said Pento, is to endure a severe downturn recession to bring home prices and consumer debt to historical norms. "A massive deleveraging has to occur -- not only on the consumer level, but on the government level," he said.

Ahead Monday's trading, industrial titan General Electric narrowed its fourth-quarter earnings-per-share projection to between 50 cents and 52 cents from a previous target of 50 cents to 65 cents. The company also affirmed its intention to maintain its $1.24 per share dividend in 2009.

Investors were also closely watching General Motors (GM Quote), Ford (F Quote) and Chrysler. Chief executives from the automakers are slated to appear before Congress with detailed plans that show their businesses still warrant a federal bailout.

Last time the Big Three's CEOs traveled to Washington, lawmakers refused them the $25 billion they sought and berated them for, among other things, flying to the hearing on private jets.

GM announced that its CEO, Rick Wagoner, would this time be driving a Chevrolet Malibu hybrid sedan from Detroit to Washington. Neither of the other two companies' chiefs is flying by corporate jet, according to reports.

"My personal preference would be to force a merger between all or two of them," Hinsdale's Nolte said of the automakers. "They're going to have to get smaller. They're not selling that many cars anymore." Nolte said that the $25 billion bailout the automakers are after is not an adequate solution. Worries that consumers would cease buying cars from a bankrupt company are overstated, he said.