NEW YORK - Stocks advanced while credit markets remained strained Friday ahead of an expected House vote on the government's $700 billion financial rescue plan and after Wells Fargo Co. agreed to buy Wachovia Corp. in a $15.1 billion deal.
Investors also appear relieved that the government's September employment report wasn't worse, although the Labor Department said payrolls shrank by 159,000, more than the 100,000 economists predicted. The nation's unemployment rate remained flat at 6.1 percent, as expected.
Investors are eager for unemployment to remain in check because widespread job losses could damp consumer spending, which accounts for more than two-thirds of the nation's economic activity.
On a busy Friday, investors were awaiting resolution on the government's plan to buy up bad assets from banks and other institutions to shore up the financial industry and help resuscitate credit markets. Trading across markets has been volatile throughout the week based on investors' reading of whether the plan would win approval; on Monday, the House's rejection took Wall Street and Capitol Hill by surprise.
The Senate subsequently passed a sweetened version of the plan that added tax breaks and raised the limit on federal deposit insurance from $100,000 to $250,000. The revote is expected to occur again during market hours, which could make for somewhat restrained trading until it is complete.
While much of the nervousness on Wall Street has been blamed on uncertainty about the rescue plan's chances, investors are now contending with worries about the broader economy, not just the credit markets. On Thursday, the Dow Jones industrials, which have seen triple-digit moves each day this week, fell 348 points on a growing belief that the plan won't stop the U.S. from falling into a prolonged recession.
Investors did find some room for optimism, however. The Wells Fargo-Wachovia deal cheered investors because, unlike several recent banking tie-ups, it wasn't put together at the behest of regulators or using government money. The agreement upends a plan announced Monday by Citigroup Inc. to acquire Wachovia's banking operations for $2.16 billion, a move orchestrated by the Federal Deposit Insurance Corp.
Ahead of the house vote, the credit markets indicated increased demand for safety. The yield on the 3-month Treasury bill, the safest type of investment, fell to 0.59 percent from 0.70 percent late Thursday. Yields have remained low in recent weeks because investors are eager to safeguard their money.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.61 percent from 3.64 percent late Thursday.
In the first half-hour of trading, the Dow rose 133.73, or 1.28 percent, to 10,616.58.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 23.33, or 2.09 percent, to 1,137.61, and the Nasdaq composite index rose 45.74, or 2.31 percent, to 2,022.46.
The dollar was mostly higher against other major currencies, while gold prices fell.