(RTTNews) - Stocks are continuing to see substantial strength in mid-afternoon trading on Monday, as traders pick up stocks at reduced levels following recent weakness. Optimism about the latest round of government measures to stem the credit crisis is contributing to the broad based strength.

Before the start of trading, the Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank jointly announced further measures to improve liquidity in short-term U.S. dollar funding markets.

While the BoE, ECB, and SNB said they would conduct tenders of U.S. dollar funding with 7-day, 28-day, and 84-day maturities at fixed interest rates, the Bank of Japan said it would be considering the introduction of similar measures.

Accordingly, the Federal Reserve said that is has authorized increases in the sizes of its temporary swap facilities with the BoE, ECB, and SNB, so that these central banks can provide U.S. dollar funding in quantities sufficient to meet demand.

Additionally, U.S. Treasury Secretary Henry Paulson confirmed over the weekend that he is considering plans for the U.S. government to invest in banks. Paulson said that the recently passed financial rescue package gives the Treasury Department authority to inject fresh capital in the system in order to thaw frozen credit markets.

Meanwhile, the Group of Seven finance ministers signed a one-page statement pledging to work together to stabilize the markets. There were no specific proposals included in the statement, but the G7 expressed support for plans to partially nationalize a number of banks in the U.K. and U.S.

Peter Boockvar, equity strategist at Miller Tabak said, “The extraordinary steps that governments around the world have announced to stabilize the banks and interbank lending hopefully brings us to the end of this phase of the great deleveraging story and that concerns with massive bank failures and a collapse of the world’s financial system can be put to rest.”

In recent trading, the major averages have pulled back well off their best levels of the day, although they remain firmly in positive territory. Traders will be paying close attention to whether the markets can hold onto the strong gains in the final hour of trading.

After posting a record intraday point gain of more than 600 points earlier in the session, the Dow is currently up 527.99 at 8,979.18. The Nasdaq is currently up 106.11 at 1,755.62, while the S&P 500 is up 56.27 at 955.49.

Dow Components

Nearly all of the Dow components are in positive territory in mid-afternoon trading, contributing to the standout gain by the blue chip index. Of the thirty Dow components, currently only two are in negative territory.

General Motors (GM) is turning in one of the Dow’s best performances, with the auto giant currently up 25.2 percent. With the gain, shares of GM are moving further off the multi-decade closing low set last Thursday.

The gain by GM comes on the heels of reports over the weekend that indicated that GM has held preliminary talks to acquire Chrysler. In other news, GM said sales in the Latin America, Africa and Middle East region rose by more than 3 percent in the third quarter.

After falling sharply in recent sessions, shares of Alcoa (AA) have also shown a strong upward move. The aluminum producer is currently up 13.4 percent after ending last Friday’s trading at a thirteen-year closing low.

Alcoa is moving higher along with most other resource stocks, which are benefiting from a rebound in commodities prices. While traders continue to express some concerns about the outlook for demand, many feel that the recent sell off has been overdone.

Most of the other Dow components are also seeing considerable strength, with American Express (AXP), AT&T (T) and Microsoft (MSFT) posting notable gains. American Express (AXP) is up 11.8 percent, while AT&T and Microsoft are both up 10.8 percent.

On the other hand, JP Morgan (JPM) and General Electric (GE) are currently the only Dow components that are in negative territory. Shares of JP Morgan are currently down 4 percent, while shares of GE are down 5.3 percent.

Sector News

As mentioned above, significant strength remains visible among resource stocks, with steel stocks still posting standout gains after falling sharply in recent sessions. Oil service and natural gas stocks also continue to post notable gains.

Airline stocks also continue to perform well in mid-afternoon trading, resulting in an 8.8 percent gain by the Amex Airline Index. The index is adding to the 11.3 percent gain posted in the previous session, moving further off the nearly three-month closing low set last Thursday.

While the price of oil is currently regaining some ground, traders are optimistic that the recent drop in oil prices will help to reduce jet fuel costs for the airlines. UAL Corp. (UAUA) and Continental Airlines (CAL) are posting notable gains.

With Morgan Stanley (MS) leading the way higher, brokerage stocks are also turning in some of the market’s best performances. Shares of Morgan Stanley are currently up 72.5 percent, contributing to a 9.8 percent gain by the Amex Securities Broker/Dealer Index.

The gain by Morgan Stanley comes on the heels of news that Mitsubishi UFJ Financial Group has invested $9 billion in the financial services giant. Traders had recently expressed concerns that Mitsubishi would not follow through on its proposed investment.

Telecommunications, utilities, and health insurance stocks are also posting substantial gains in mid-afternoon trading. The Amex Telecom Index is currently up 9.1 percent, the Dow Jones Utilities Average is up 8.5 percent, and Morgan Stanley Healthcare Payor Index is up 7.6 percent.

On the other hand, gold and real estate stocks continue to see some weakness, with the losses by gold stocks coming as gold for December delivery closed down $16.50 at $842.50 an ounce.

Other Markets

In overseas trading, most of the major Asian markets advanced in Monday’s session, with the positive sentiment arising out of reassuring government actions and comments. Nonetheless, the Japanese market remained closed on account of a public holiday.

The major European markets also closed sharply higher after the European Union agreed to underwrite inter-bank lending. The French CAC 40 Index and the German DAX Index both closed up more than 11 percent, while the U.K.’s FTSE 100 Index rose 8.3 percent.

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