U.S. Markets Surge As Credit Starts to Thaw

It won't be alone, Kamerick said. "There's a huge backlog of issuers who have not had access to the market," he said, adding that after third-quarter earnings are announced, there will be "a wave" of companies announcing plans to sell bonds. Those firms will probably end up paying higher interest rates than they would when credit isn't as tight.

All 30 companies in the Dow closed higher, with shares of Boeing up 15.5 percent, to $48.91, after the company announced Monday that it had reached a tentative contract agreement with striking machinists.

Shares of GM closed up 14.8 percent, to $6.25, on reports of the company's talks with the Treasury. The source briefed on the negotiations said the size of Wagoner's loan request to the government was unclear. Analysts have said that a combined GM-Chrysler would need about $10 billion in fresh cash to compensate laid-off workers, close plants and integrate their operating systems. The White House could not confirm that $10 billion was the contemplated number.

"The automakers have been in contact with us," White House press secretary Dana Perino said at a briefing yesterday. "We're trying to work with them at various levels and at different departments, including Energy, Treasury and Commerce. And we're trying to work with the tools that Congress has provided us."

By midday, the market regained its upward momentum. Along with commercial paper markets rebounding, investors were cheered by the prospect of the Fed's expected half-percentage-point decrease in its key fund rate, to 1 percent.

"The main thing people are looking at today is the Fed because monetary stimuli will have a natural effect on more liquidity, and people think that this is a positive for the economy," said Matt McCormick, portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati.

Tom Sowanick, chief investment officer at Clearbrook Financial in Princeton, N.J., said the Fed might be wise to wait and let the rescue efforts planned by the government take effect.

"The Fed would be well-served to see how these work out instead of using one of the few bullets left in its arsenal," Sowanick said. He pointed to the program by the Fed to buy up commercial paper as a "major event" that addresses the heart of market fears.

The day started on a strong note, with global markets rallying overnight Monday because of the yen's decline against the dollar, a positive sign for exports from Japan, which are its main engine of growth.

Currency markets remained volatile yesterday and reversed some of the dramatic shifts of recent days, especially in mid-size developing countries. This reflected renewed investor confidence in these economies. The Brazilian real rose 4 percent vs. the dollar, and there were similarly sharp rises in the currencies of Mexico, South Korea, Poland, South Africa, Turkey and Hungary. The European Union, World Bank and International Monetary Fund last night said they would provide Hungary with $25.1 billion in loans to help shore up its faltering economy.

Shortly after the U.S. market opened yesterday, the Dow jumped 300 points before turning downward on a private research firm's report that the consumer confidence index had hit the lowest level in its 41-year history. The Conference Board's index plunged to 38 in October from 61.4 in September, signaling the possibility of a long recession as consumers curb spending. That pessimism was compounded by bleak housing data. The S&P/Case-Shiller home-prices index fell 16.6 percent in 20 major metropolitan areas in August compared with August 2007.

Staff writers Steven Mufson, Kendra Marr and Neil Irwin contributed to this report.