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Stock prices surge amid credit recovery measures

Stock prices surged Monday as investors took signs of easing in the credit markets as evidence that government measures to revive the battered financial system are taking hold.

Investors, shaken by extreme volatility over the past few weeks, turned more optimistic as bank-to-bank lending rates showed further signs of easing. There’s also evidence that credit is beginning to loosen up as corporations are slowly returning to the bond market to raise money.

This has helped to temper recession worries, but Federal Reserve Chairman Ben Bernanke warned that the economy is likely to be “weak for several quarters, and with some risk of a protracted slowdown.” He told Congress in remarks before the House Budget Committee that a fresh round of government stimulus might help ease the country’s economic weakness.

“If the Congress proceeds with a fiscal package, it should consider including measures to help improve access to credit by consumers, home buyers, businesses and other borrowers,” Bernanke said. “Such actions might be particularly effective at promoting economic growth and job creation.”

Wall Street also pored over a number of key earnings reports for a glimpse about future business conditions. Among those reporting, oilfield services provider Haliburton Co. and toy maker Hasbro Inc. topped estimates.

In midmorning trading, the Dow Jones industrial average rose 178.01, or 2.01 percent, to 9,030.23.

Broader indexes were also higher. The Standard & Poor’s 500 index rose 18.87, or 2.01 percent, to 959.42. The Nasdaq composite index rose 15.94, or 0.93 percent, to 1,727.23.

Strains in credit markets continued showing signs of easing after a raft of bailout measures by governments around the world, including a joint U.S. and European plan to buy stakes in private banks to boost their lending. Demand for Treasury bills, regarded as the safest assets around, lessened Monday but remained relatively high in a sign that there was still much fear in the markets.

The three-month Treasury bill Monday yielded 0.91 percent, up from 0.82 percent late Friday. That’s better than the 0.20 percent of last Wednesday, but the yield but has not surpassed 1 percent in more than a week.

Investors were also optimistic about the steady decline in interbank lending rates, which fell for a sixth straight day Monday. The London interbank offered rate, or Libor, for three-month dollar loans fell 0.36 percent to 4.06 percent, the biggest daily drop since January.

The benchmark 10-year note was little changed. The yield, which moves opposite its price, rose to 3.94 percent from 3.93 percent late Friday.

Haliburton shares spiked $2.04, or 11.2 percent, to $20.30 after the company’s results surpassed expectations. The company also said that a slowdown in North American drilling won’t hurt business in the fourth quarter.

Earnings from American Express Co., Lockheed Martin Corp. and Texas Instruments Inc. are due later in the day.

Light, sweet crude was up $2.16 to $74.01 a barrel on the New York Mercantile Exchange. Last week, it sank to an almost 16-month low on worries about a deep global recession obliterating fuel demand.

The Russell 2000 index of smaller companies rose 9.30, or 1.77 percent, to 535.73.

Advancing issues outpaced decliners by 3 to 1 on the New York Stock Exchange, where volume was a light 207.5 million shares.

Financial markets overseas were higher. Japan’s Nikkei stock average closed up 3.59 percent. Britain’s FTSE 100 was up 3.30 percent, Germany’s DAX index was up 0.70 percent, and France’s CAC-40 was up 2.93 percent.