New-Stimulus Talk Helps Buoy Stocks

Updated from 1:33 p.m. EDT

U.S. stocks were staying positive Monday afternoon as credit markets continued to thaw and Federal Reserve Chairman Ben Bernanke cautiously endorsed the idea of a new economic stimulus package.

The Dow Jones Industrial Average was up 245 points at 9097, and the S&P 500 added 27 points to 968. The Nasdaq climbed 28 points to 1741.

Helping spur the averages higher was a weekend announcement from President Bush that he would 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 Libor, a measure of the rate banks charge one another for large loans, dropped 36 basis points to 4.06%. 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 offers 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 Fed's plan to purchase commercial paper should provide additional support, as will money borrowed by the Treasury to provide banks with further capital.

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.

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