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Stocks Take Off as Banks Surge

Stocks shot out of the gate Wednesday as lawmakers prepared to move ahead on an $825 billion economic stimulus plan and banks got a boost from this so-called "bad bank" plan.

Citigroup and Bank of America soared more than 10 percent each amid hope that help is on the way for the battered sector as the Obama administration is thought to be close to finalizing a “bad bank” plan to mop up banks' toxic assets.

Rounding out the Dow's top three was JPMorgan , which gained more than 7 percent.

Wells Fargo shares surged nearly 20 percent as the bank reported a surprise loss but maintained its dividend and said it doesn't need any more bailout fundsto help it absorb Wachovia bank.

The Financial Select SPDR exchange-traded fund gained more than 8 percent as traders looked for the sector to get a big boost.

>> Bank Stocks Soar: Track Them Here

Investors were also enthused about the gigantic stimulus plan, which is said to be close to $900 billion now. The House of Representatives is slated to vote on the plan today. If it clears the House, then Senate leaders could begin working on their version.

Early earnings showed a mixed bag, with companies reporting lower profits but investors looking for positive nuggets amid the gloom.

AT&T reported its profit dropped, hurt by one-time fees to get the exclusive rights to be the sole iPhone carrier and more customers cutting off their land lines.

This came a day after Verizon met its earnings target but reported a slowdown in its wireless business.

Boeing reported an unexpected loss as its results were hurt by a strike and delays for its new 747 jumbo jet.

Legg Mason posted a bigger-than-expected lossas withdrawals from its funds soared and the asset manager took charges related to its wealth-management division. But the second-largest publicly traded U.S. asset manager said it is "aggressively" cutting costs.

After the bell on Tuesday, Yahoo beat Wall Street expectations, helped by cost cuts, but warned the bleak advertising market is going to hurt sales going forward. Sun Microsystems also topped forecasts with a smaller-than-expected loss.

Investors also looked to a key policy meeting of the Federal Open Market Committee for more action to stem the credit crisis.

Rate cuts aren't an option anymore, so the focus will shift to any alternative action the Fed hints at in its statement, such as printing money.

The FOMC is due to issue the statement at 2:15 pm ET.

Political and business leaders from around the globe gathered at the World Economic Forum in Davos, Switzerland, to discuss the state of the economy and the potential road to recovery.

>> Check out CNBC's full coverage of Davos, including our Heard on the Mountain blog.

In economic news, mortgage applications fell to November levels after a tick higher in interest rates discouraged potential home buyers. The news came during a modestly positive week for housing, with previous reports showing a gain in home buying and a drop in prices that was a bit less than analysts expected.

Still to Come:

WEDNESDAY: Davos Economic Forum begins; Fed decision on interest rates; Earnings from Pfizer, Boston Scientific, Qualcomm and Starbucks
THURSDAY: Weekly jobless claims; durable-goods orders; new-home sales; Earnings from Altria, Amazon, Broadcom, Colgate-Palmolive, Ford, Eli Lilly and Wyeth
FRIDAY: Q4 GDP; consumer sentiment; Earnings from Chevron, ExxonMobil, P&G and Honeywell

Send comments to cindy.perman@nbcuni.com.