It was another good day in the market. The Dow rose 187.32, or 1.52%, to 12,548.64, after rising more than 260 points on Thursday, the last day of trading before the Easter weekend.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 20.37, or 1.53%, to 1,349.88, and the Nasdaq composite index rose 68.64, or 3.04%, to 2,326.75.

The Russell 2000 index of smaller companies rose 19.86, or 2.91%, to 701.28.

This came as investors digested a new agreement that will give Bear Stearns shareholders five times the payout that was set in a JPMorgan Chase & Co. buyout deal a week ago. Investors were also pleased by a stronger-than-expected housing report, and sent the Dow Jones industrial average nearly 190 points.

Bear Stearns shares jumped $3.42, or 57%, to $9.38, while JPMorgan rose 58 cents to $46.55.

The Fed's move and even the housing figures appeared to alleviate some of Wall Street's concerns about souring mortgage debt and lenders' resulting hesitance to grant loans of any sort. The latest Bear Stearns deal signals that investors' losses might not be as sizable as feared.

"The reason we've rallied the last three or four days is people are saying 'Hey, even if this paper is worth less than people think, the Fed is willing come in and buy it at some level,'" said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh.