Rumors about the shape of the stimulus and bank bailout lifted the markets on Thursday.

The

Dow Jones Industrial Average

gained 106.41, or 1.34%, to 8,063.07, while the

S&P 500

added 13.62, or 1.64%, to 845.85. The

Nasdaq

rose 31.19, or 2.06, 1,546.24.

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Pete Najarian said on

CNBC

's "Fast Money" TV show that the markets started to turn on chatter about getting rid of mark to market in the valuation of toxic assets.

Dylan Ratigan, the moderator of the show, said one of the most interesting stocks was

Bank of America

(BAC) - Get Report

, which was heavily traded and the yield of its preferred stock jumping to 20%. He said the stock is either heading to zero if the bank is nationalized or it's going a lot higher.

Tim Seymour noted other huge banks in Europe like

Deutsche Bank

(DB) - Get Report

and

UBS

(UBS) - Get Report

are still in a lot of trouble.

Ratigan asked Sen. Kay Bailey Hutchison, R-Texas, to comment on the stimulus plan, which appears to be losing public support in the polls despite President Obama's statements that "a catastrophe" awaits the country if the stimulus plan is not enacted quickly.

Hutchison stressed the need for caution in dealing with the stimulus. "We should not rush into $1 trillion in expenditures until we know it will be stimulative, that the tax cuts will be right and that it's the right thing to do."

She said the government has already put $1 trillion out there, allocated $700 million to bailout the financial industry and seen last year's $600-per-person stimulus make not much of a dent. "I'm worried that our creditors will not invest in America," she said.

Hutchison agreed with Guy Adami that getting the banks lending is the biggest issue on the table, noting there has been a lot of the discussion on how to deal with the transfer of bad assets and putting a value on them.

Ratigan pointed out

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

have come out and said they want to repay the TARP money they received as soon as this year.

That produced a chuckle from David Trone, managing director of Fox-Pitt Kelton, who said, "They don't want their pay to be cut. It's as simple as that."

Trone said the banks don't have the luxury of paying back TARP because they have "traditional credit-loan portfolio issues that are affected by the bad economy." He said Goldman and Morgan Stanley don't have those problems because they are not really lenders.

Pete Najarian said community banks have done well in the tough economic environment because they've avoided toxic investments. In particular, he liked how

Northern Trust

(NTRS) - Get Report

has performed.

Asked to name a stock that stands out among the financials, Trone said he liked

JPMorgan Chase

(JPM) - Get Report

because it is drawing prime brokerage accounts and deposits as well as doing some lending.

Ratigan and the panel went over some of the highlights of today's market session. He asked Finerman to comment on the retail sector, especially

Macy's

(M) - Get Report

, whose stock rose after it turned in better-than-expected sales figures.

Finerman expressed concerned about the disconnect between Macy's debt situation and stock price. Asked how she would trade in this situation, she said she would go long on some of the debt and short on some of the equity.

Najarian said he was impressed with

Akamai Tech

(AKAM) - Get Report

, which he said "blew through the numbers."

In the health care sector, Adami said he was surprised that

Procter & Gamble

(PG) - Get Report

announced it might sell off its consumer pharma division. He said he didn't think anyone would be dumb enough to repeat what

Pfizer

(PFE) - Get Report

did when it went after

Wyeth

(WYE)

.

Cisco

(CSCO) - Get Report

rallied during the regular trading session after its disappointing guidance on Wednesday. Najarian said he's sticking with Cisco, calling it a company "you want to own" because of its $3 billion cash flow and $32 billion in cash.

Ratigan asked Seymour to comment on the rally in the commodities. Seymour said the rally was a narrow one in iron ore, steel and copper names that have bottomed out. He also said the nitrogen-based fertilizer stocks are up.

Ratigan said

Exxon Mobil

(XOM) - Get Report

continues to be impressive in the energy sector. Seymour said Exxon, with $32 billion in cash, remains "the strongest company in the most important sector in the next five years."

Najarian added that Exxon has been particularly helped by its overseas refining of diesel, which is a heavily used fuel around the world.

Continuing a segment called "Flying Blind," Ratigan asked Colin McGranahan, a retail analyst for Sanford Bernstein, to comment on what analysts are doing in the retail sector with companies that don't provide guidance.

McGranahan said he tries to figure out the direction of sales, especially the direction of demand and how it is changing. He also tries to see if a company is ahead or behind the curve in its inventory.

In the final trades, Seymour like

Potash

(POT)

. Adami liked

HP (HPQ) - Get Report

(HPQ) - Get Report

. Finerman was for

Oil Services HLDRs

(OIH) - Get Report

. And Najarian liked

PALM

(PALM)

.

"Check out

"'Fast Money'Portfolios of the Week" on Stockpickr every Thursday.