New-Stimulus Talk Sustaining Stocks

Updated from 10:59 a.m. EDT

U.S. stocks were jumpy but staying positive midday Monday as credit markets thawed and Federal Reserve Chairman Ben Bernanke discussed the future of the U.S. economy. Traders were also looking at a heap of quarterly corporate earnings statements.

The Dow Jones Industrial Average was up 154 points at 9006, and the S&P 500 added 19 points to 959. The Nasdaq climbed 12 points to 1723.

Over the weekend, President Bush announced plans to convene global leaders to continue to work on solutions to the credit crunch, according to a report by The Wall Street Journal.

On Sunday, the Dutch government said it would buy a $13.4 billion stake in ING Groep ( ING) to shore up the company's balance sheet, the Associated Press reported.

Credit markets appeared to continue to relax, as three-month dollar labor, a measure of the rate banks charge one another for large loans, dropped 36 basis points to 4.06%, while the overnight rate declined 16 basis points to 1.51%.

A downtrend in interbank lending rates remains intact, Tony Crescenzi, chief bond market strategist at Miller Tabak, wrote on his RealMoney.com blog. Tender offerings by the European Central Bank, the Bank of England and the Swiss National bank, which now provide an unlimited supply of dollars, has helped ease the market, he wrote. He also wrote that the Federal Reserve's plan to purchase commercial paper, to be implemented Monday, should provide additional support, as will additional money borrowed by the treasury to provide banks with additional capital.

Rates nonetheless remained elevated, causing wrinkles in other companies' plans. The Journal reported that General Motors ( GM) was having trouble getting funding for a purchase of fellow automaker Chrysler.

Testifying before the House Budget Committee in Washington, Ben Bernanke said that calming the financial markets would not immediately resolve all the problems faced by the broader economy. He said a second economic stimulus package may be necessary, but he warned Congress should plan it carefully.

Bernanke's sentiments about the economy were highlighted by headlines that indicated the pain was far from over for several big firms. Merrill Lynch ( MER). 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)

Treasury Secretary Henry Paulson also made an appearance to discuss details of his agency's bank recapitalization program, saying that there is enough funding available for all qualified banks to take part. He also said that the capital infusion is ultimately unlikely to bring additional costs to taxpayers.

Electronics retailer Circuit City ( CC) may close 150 stores and slash its head count, the Journal said.

Looking at corporate earnings, Ericsson ( ERIC) announced a 28% decline in third-quarter earnings but beat analyst estimates.

Oil-services firm Halliburton ( HAL) swung to a $21 million loss related to a cash settlement of convertible debt. Its income, however, reached a company record of $1 billion.

Swiss pharmaceutical company Novartis ( NVS) said its profit climbed 12% year over year on rising sales.

The Journal also reported that Internet portal Yahoo! ( YHOO) would probably announce layoffs, perhaps as early as Tuesday's earnings report.

Meanwhile, utility services firm Exelon ( EXC) offered to buy NRG Energy ( NRG) for $6.2 billion in an all-stock deal.

In analyst actions, Goldman Sachs downgraded Intel ( INTC) to neutral from buy, predicting a decline in profit margins.

Shifting to economic data, the Conference Board's leading indicators index for September climbed 0.3%, whereas economists had predicted a decline of 0.2%. The August reading was revised to a 0.9% drop.

As for commodities, crude oil was climbing 75 cents to $72.60 a barrel. Gold was adding $3.40 to $791.10 an ounce.

Longer-dated U.S. Treasury securities were edging higher. The 10-year was up 8/32 to yield 3.9%, and the 30-year was gaining 18/32, yielding 4.29%. The dollar was stronger vs. its major foreign competitors.

Abroad, European exchanges including the FTSE in London and the Dax in Frankfurt were trading higher. In Asian markets, Japan's Nikkei and Hong Kong's Hang Seng closed with gains.