As bank-to-bank lending rates slide lower, the credit climate is looking a bit brighter — at least for stronger companies. That news — along...

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NEW YORK — As bank-to-bank lending rates slide lower, the credit climate is looking a bit brighter — at least for stronger companies.

That news — along with comments from Federal Reserve Chairman Ben Bernanke and President Bush hinting the government will take more steps to help the economy — sent stock higher Monday, with the Dow Jones industrial average gaining more than 400 points.

The fear of a complete shutdown in lending is fading, but there remains a sense that when it comes to getting loans, U.S. businesses are going to be divided into haves and have-nots. As a result, the corporate landscape could look very different a year from now.

“The general economy was weakening, and that weakening has taken a turn for the worse. And any company that was already facing more challenging business conditions, when they’re confronted by tighter credit, it gives them one less degree of flexibility,” said Robert DiClemente, an economist at Citigroup.

Third time up

The Dow closed up 413.21, or 4.7 percent, at 9,265.43 on Monday. This is just the third time this month the Dow has closed with a gain.

Broader indexes also rose sharply. The Standard & Poor’s 500 index climbed 44.85, or 4.8 percent, to 985.40. The Nasdaq composite index rose 58.74, or 3.4 percent, to 1,770.03.

Monday’s huge gain doesn’t mean the stock market is done with the volatility of recent weeks; past recoveries have seen stocks ratchet up and down. Still, there is a sense on the Street the worst of the selling is over.

The credit climate is still sending the auto industry into a state of disarray. General Motors, which has been burning through more than $1 billion a month, wants to buy Chrysler to access its currency stockpile, but GM appears to be having trouble lining up financing for the deal.

Some other companies are also having trouble nailing down money to tide them over. Circuit City is preparing to close a fifth of its stores and cut thousands of jobs to avoid filing for Chapter 11 bankruptcy protection, The Wall Street Journal reported Monday.

The Journal said Circuit City has retained investment bank Rothschild to talk to banks and get emergency financing.

To be sure, companies that appear more creditworthy to banks should find loans more easily and more cheaply if the trends of the past week continue. The London interbank offered rate, or Libor, for three-month dollar loans dropped for the sixth straight day, falling by 0.36 percentage point to 4.06 percent.

The recent decline in this rate — which establishes lending costs for businesses and individuals — reflects greater trust in the financial sector after governments around the world have guaranteed billions of dollars in bank debt and pledged to buy stakes in ailing banks.

T-bills up

The decrease in Libor has helped ease some of the demand for Treasury bills, considered the ultimate safe asset.

The yield on the three-month T-bill surpassed 1 percent for the first time in nearly two weeks, rising to 1.26 percent from 0.82 percent Friday.

The Treasury Department auctioned $25 billion in three-month bills at a discount rate of 1.25 percent, up from 0.50 percent last week, and $26 billion more in six-month bills at a discount rate of 1.80 percent, up from 1.10 percent last week.

Those higher rates for short-term government debt suggest “continued healing in the credit markets,” said Tony Crescenzi of Miller Tabak in a note Monday.

As funds slowly take money out of safe assets, they are returning to assets that carry a bit more risk. Crescenzi noted the mortgage-backed securities market signaled “increased risk taking” Monday.

Better paper market

And the market for commercial paper — the unsecured debt that companies sell for short-term financing — continued to improve.

Commercial paper rates were generally down a 0.20 to 0.40 percentage point for key issuers tapping the market Monday, including American Express, General Electric, HSBC Finance, AT&T and Coca-Cola, said Kevin Giddis, managing director of fixed income at Morgan Keegan.

Just a few weeks ago, even stronger companies like AT&T were having trouble selling paper for longer than overnight. Now, investors are starting to step in and buy paper with 30-day and 60-day maturities, Giddis said.

Next Monday, the Federal Reserve is scheduled to start buying commercial paper from issuers that can’t find buyers in the market.

In other Treasury trading, the two-year note slipped 5/32 to 100 18/32 and yielded 1.69 percent, up from 1.60 percent Friday.

The 10-year note rose 18/32 to 101 2/32 and yielded 3.88 percent, down from 3.93 percent. The 30-year bond rose 1 8/32 to 4.28 percent, down from 4.31 percent.