Dow Jumps 413 on Fed, Credit Markets

News at a Glance

• Late Boost: Major indexes widen gains; Dow gains 4.7%.
• Uncrunching: Credit eases on moves by Netherlands, S. Korea.
• More Juice: Fed Chairman says new package "seems appropriate."
• Crude Rises: Oil advances on planned OPEC supply cut.

The Lowdown

A high-end endorsement for another stimulus package, surprising economic data and the promise of easier lending had traders feeling bullish Monday.

Stocks widened their gains after Federal Reserve Chairman Ben Bernanke advocated for more legislation to ease the financial crisis and the tight grip on the credit markets loosened. The Dow Jones Industrial Average rose 413 points, or 4.7%, to finish the day at 9265. The Nasdaq picked up 59 at 1770, and the S&P 500 climbed 45 to 985.

Traders welcomed the Bush administration's push for a second stimulus. Speaking before the House budget committee, Bernanke made the case for more Congressional action aimed at promoting economic growth and strengthening the labor market.

"With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Bernanke said in prepared remarks. He added that Congress "should consider including measures to help improve access to credit by consumers, homebuyers, businesses, and other borrowers."

In other economic news, the Leading Index rose 0.3% in September, rebounding from sharp declines in July and August.

Before Bernanke spoke and the new data were released, a loosening of the credit markets helped spur early enthusiasm. Treasury prices eased and the intrabank lending rate declined after moves by two foreign governments to shore up their financial sectors. In Europe, Netherlands promised to pump $13.4 billion into ING after the firm warned it would post its first quarterly loss. In Asia, South Korea said it would guarantee as much as $100 billion in its banks' foreign debt.

In energy, oil prices rose after Chakib Khelil, the president of the Organization of Petroleum Exporting Countries, said the group plans to make a "substantial" supply cut at its next meeting, which is scheduled to begin Friday. By 4 p.m., crude oil traded up $2.95 on the day at $74.80 a barrel.

In global markets, Hong Kong's Hang Seng index and Japan's Nikkei each finished with gains of more than 3.5%. In Europe, traders welcomed the ING bailout, as the major indexes of the Netherlands, Sweden, France, Norway and Britain each advanced.

Corporate News

• General Motors (GM) and Chrysler are continuing to hold talks about a potential deal to join the two automakers, however conflicting reports paint a muddy picture of how the negotations are progressing. The Wall Street Journal reported the GM is having a difficult time tracking down private investors to fund the deal and its associated layoffs and contract buyouts. However, Reuters reported that negotiations "have intensified in recent days and are moving closer toward a conclusion." Each cited anonymous sources.
• Exelon (EXC) has offered to acquire NRG Energy (NRG) in an all-stock deal worth $6.2 billion, or $26.43 a share. The buyout would create the nation's largest power company, the firm said. The effect on earnings and cash flow would be "immediate," Exelon Chairman and Chief Executive John W. Rowe said.
• Yahoo (YHOO) is planning sweeping cost cuts and a workforce reduction likely to exceed its January estimate of 1,000 layoffs, The Wall Street Journal reported, citing anonymous sources. The announcement could come as soon as Tuesday, when the firm is scheduled to release its third-quarter earnings report.
• Merrill Lynch (MER) Chief Executive John Thain predicts thousands of jobs will be lost when his firm is absorbed by Bank of America (BAC), Bloomberg reported. However, the cuts are not likely to come from the firm's fixed income or commodities groups. Instead, jobs in finance, operations and information technology are on the block as part of the firms' promise to reduce their combined costs by $7 billion.
• Hasbro (HAS), the maker of Mr. Potato Head, posted a 14.4% decline in third-quarter profit but still topped analysts' estimates on strong sales of its Star Wars and Playskool toys. Meanwhile, Mattel (MAT) posted a 0.5% increase in third-quarter net income on sales of its Fisher-Price and American Girl lines but missed Street estimates.

The Economy

• The Leading Index, a composite indicator for economic growth, rose 0.3% in September, up from a revised 0.9% decrease in August, the Conference Board said. Economists had expected a 0.3% decline. REPORT

ReadMe

• The New York Times Magazine on oil prices: Even with the recent decline, the cost of a barrel of oil has skyrocketed over the last six years. What's going on? And is it necessarily bad? STORY
• Time on gasoline: Oil and gas prices are not always locked in step. Here's an explanation for the current disparity. STORY
• BusinessWeek on the financial crisis: Who's fault is it? STORY

WatchMe

• Reuters on oil and the consumer: Cheaper oil prices may signal weakness in demand, but they may ultimately benefit the economy. VIDEO
• Bloomberg on the market's limbo contest: Eric Ross, the director of U.S. equity research at Canaccord Adams, offers his projection for how much lower stocks will go. VIDEO
• Wall Street Crisis: Is Your Money Safe: Analysis of the volatile market with an eye toward investing. CNBC, 7 p.m.