Wall Street Ends on a High Note; Dow Gains 270 Points

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

In a continuation of its efforts to provide liquidity to the financial system during the credit crisis, the Federal Reserve extended until April 30 the Primary Dealer Credit Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility and the Term Securities Lending Facility.

In other government news, reports also indicated that President-elect Barack Obama would name New Mexico Governor Bill Richardson as his secretary of commerce.

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. Shares rose 14% to $17.61.

Investors were also closely watching General Motors (GM Quote), Ford (F Quote) and Chrysler. Chief executives from the automakers were submitting detailed plans to Congress in an effort to show their businesses still warrant a federal bailout.