After seesawing earlier in the day, the Dow Jones industrials finished up nearly 120 points on the afternoon report from The Wall Street Journal. The stock market has been buffeted by concerns about fallout from the mortgage and credit crisis. Countrywide's problems with delinquent and defaulting loans have sent stocks falling even in recent days.

"For the last month, rumors are that Countrywide was going into bankruptcy," said Ryan Larson, senior trader at Voyageur Asset Management. "Any deal with Bank of America is good news, and the market is looking for even a hint of good news these days."

Credit concerns were one reason the market waffled in earlier trading, with investors trying to reconcile comments on the economy from Federal Reserve Chairman Ben Bernanke and Kansas City Fed President Thomas Hoenig.

Stocks jumped after Bernanke said the Fed was ready to lower interest rates again to ward off a recession: "We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," Bernanke said.

But they bobbled up and down before turning narrowly mixed after Hoenig said later that inflation remains a concern and the stock market is "not the center of our attention." The comments kept alive fears that the Fed may not respond to investor concerns even as it monitors the weakening economy.

Furthermore, Wall Street is worried that it will take a lot more than rate cuts to restore economic momentum.

The Dow Jones industrial average rose 117.78, or 0.92 percent, to 12,853.09.