WASHINGTON — Urgent efforts to lash together a $700 billion rescue plan for the national economy appeared to be stalling Thursday night, hours after key lawmakers had declared they had reached a deal.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke sped to Capitol Hill to try to revive or rework the proposal that President Bush said must be quickly approved by Congress to stave off economic disaster.

Congressional leaders were to meet with the economic chiefs into the night.

After six days of intensive talks on the unprecedented package proposed by the Bush administration, with Wall Street tottering and presidential politics intruding six weeks before the election, there was more confusion than clarity.

The day’s earlier apparent breakthrough, announced with fanfare at midday, was followed by a White House summit bringing together President Bush, presidential contenders John McCain and Barack Obama, and top congressional leaders. But that meeting, aimed at showing unity in resolving a national financial crisis, broke up with conflicts in plain view.

Inside the session, House Republican leader John Boehner expressed misgivings about the emerging plan and McCain would not commit to supporting it, said people from both parties who were briefed on the exchange. They spoke on condition of anonymity because the session was private.

The earlier agreement by key members of Congress from both parties — but not top leaders — would have given the Bush administration just a fraction of the money it wanted up front, subjecting half the $700 billion total to a congres-sional veto.

But conservatives were still in revolt, balking at the astonishing price tag of the proposal and the hand of government that it would place on private markets.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement “is obviously no agreement.”

One group of House GOP lawmakers circulated an alternative that would put much less focus on a government takeover of failing institutions’ sour assets. This proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the U.S. purchase the assets.

Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead. The price tag of the administration’s plan to bail out tottering financial institutions — and the federal intrusion into private business matters — have been major sticking points for many Republican lawmakers.

There is wide agreement the U.S. economy is in peril, with financial institutions going under or near the edge and re-cession looming along with the resulting layoffs and increased home foreclosures.

There had been hopes for broad agreement, too, on a prescription by now, with a confident White House an-nouncement by the president, McCain, Obama and congressional leaders.

But the best Senate Republican leader Mitch McConnell would say afterward was, “It’s clear that more progress is needed and we must continue to work together quickly to protect our economy.”

Democrat Obama and Republican McCain, who have both sought to distance themselves from the unpopular Bush, sat down with the president at the White House for an hourlong afternoon session that was striking in this brutally partisan season — but also, according to one participant, “a full-throated discussion.” By also including Congress’ Democratic and Republican leaders, the meeting gathered nearly all Washington’s political power structure at one long table in a small West Wing room.

“All of us around the table ... know we’ve got to get something done as quickly as possible,” Bush told reporters, brought in for only the start of the meeting. Obama and McCain were at distant ends of the oval table, not even in each other’s sight lines. Bush, playing host in the middle, was flanked by Congress’ two Democratic leaders, House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.

McCain and Obama later said they both still expected an agreement could be reached.

Under the accord announced hours earlier among key lawmakers, the Treasury secretary would get $250 billion im-mediately and could have an additional $100 billion if he certified it was needed, an approach designed to give lawmak-ers a stronger hand in controlling the unprecedented rescue. The government would take equity in companies helped by the bailout and put rules in place to limit excessive compensation of their executives, according to a draft of the outline obtained by The Associated Press.

As negotiations continued Thursday night, Michele Davis, the chief Treasury spokeswoman said, “There are still open issues to be resolved, and we are committed to resolving them.”

The plan’s centerpiece still is for the government to buy the toxic, mortgage-based assets of shaky financial institu-tions in a bid to keep them from going under and setting off a cascade of ruinous events, including wiped-out retire-ment savings, rising home foreclosures, closed businesses, and lost jobs.

Layered over the White House meeting was a complicated web of potential political benefits and consequences for both Obama and McCain.

McCain hoped voters would believe that he rose above politics to wade into successful, nitty-gritty dealmaking at a time of urgent crisis, but he risked being seen instead as either overly impulsive or politically craven, or both. Obama saw a chance to appear presidential and fit for duty, but was also caught off guard strategically by McCain’s surprising gamble in saying he was suspending his campaigning and asking to delay Friday night’s debate to focus on the crisis.

Stocks rise on bailout hopes; credit remains tight

By TIM PARADIS
AP Business Writer

NEW YORK — Financial markets grew more upbeat Thursday as political leaders said they struck an agreement in principle on a massive spending plan to revive the crippled financial system. The Dow Jones industrial average jumped about 200 points on optimism about the bailout, and demand for safe-haven assets remained high but eased slightly as some investors placed bets that a deal would help unclog credit markets.

Stock market investors got a lift when key lawmakers said they would present the $700 billion plan to the Bush administration and hoped for a vote by both houses of Congress within days. Still, some resistance remained from House Republicans as the closing bell on Wall Street rang ahead of a meeting of congressional leaders at the White House.

And after the close of trading, it was clear that plan could still face some obstacles. Stock futures weakened, signaling a lower open Friday, after Sen. Richard Shelby, the top Republican on the Banking Committee, left the White House meeting and said the announced deal ``is, obviously, no agreement.''

Trading that has been difficult for more than a week is likely to remain so in the coming days.

``The market's going to experience volatility as the terms become known,'' said Doug Roberts, chief investment strategist at Channel Capital Research.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers Tuesday and Wednesday to quickly sign off on the plan, which they said would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. Fear of heavy losses on these assets has made banks hesitant to extend credit, which in turn threatens the overall economy by making it harder and more expensive for businesses and consumers to borrow money.

President Bush highlighted what he sees as the urgency in a national address Wednesday night. Major elements are still being worked out, including how to phase in the mammoth cost of the package and whether the government will get an ownership stake in troubled companies.

Alan Lancz, director at investment research group LanczGlobal, said stock market investors were encouraged that the rescue looked more likely than it had earlier in the week. He said the move could help unclog credit markets by allowing banks and investors to place values on assets tied to mortgages.

``How do you establish a floor? Well, this is the bazooka. This is how you establish a floor,'' he said of the plan's goal of buying up the toxic debt.

Still, some investors had their doubts. Demand eased but remained high for the 3-month Treasury bill, considered the safest short-term investment. Its yield rose to 0.72 percent from 0.49 percent late Wednesday. That means investors are still willing to earn the slimmest of returns in exchange for a safe place to put their money. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.84 percent from 3.81 late Wednesday.

The Dow rose 196.89, or 1.82 percent, to 11,022.06. The gain helped erase some of the losses from heavy selling earlier in the week, though the blue chips still remain down by more than 360 points, or 3.2 percent.

Broader stock indicators also rose Thursday. The Standard & Poor's 500 index advanced 23.31, or 1.97 percent, to 1,209.18 and the Nasdaq composite index rose 30.89, or 1.43 percent, to 2,186.57.

Advancing issues outnumbered decliners by nearly 3 to 1 on the New York Stock Exchange, where consolidated volume came to 5.73 billion shares, compared with 4.66 billion traded Wednesday.

Roberts noted that the market's back-and-forth moves of late might be unnerving for investors but ultimately can leave stocks with little to show for all the volatility.

``Most of this is just oscillating around a straight line,'' he said, noting that last week's huge daily moves, which also included triple-digit moves in the Dow, left stocks largely unchanged for the week.

The dollar was mixed against other major currencies Thursday, while gold prices fell.

Light, sweet crude for November delivery rose $2.29 to settle at $108.02 a barrel on the New York Mercantile Exchange.

Meanwhile, disappointing readings on employment, housing and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co., underscored the difficulties facing the economy.

The Labor Department said the number of people seeking unemployment benefits increased by 32,000 to a seasonally adjusted 493,000 last week — the highest level in seven years and well above analysts' expectations of 445,000. Hurricanes Ike and Gustav added about 50,000 new claims in Louisiana and Texas, the department said.

The Commerce Department said sales of new homes fell sharply in August to the slowest pace in 17 years. The average sales price also fell by the largest amount on record. New homes sales dropped by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991.

The department also said orders for expensive manufactured goods sank in August by the largest amount in seven months as demand for both airplanes and cars sank. Durable goods orders fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected and the biggest drop since a 4.7 percent fall in January.

GE lowered its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets. The stock, which had declined in the early going, finished up $1.09, or 4.4 percent, to $25.68 alongside the gains in the broader market.

The Russell 2000 index of smaller companies rose 7.97, or 1.14 percent, to 705.74.

Overseas, Japan's Nikkei stock average fell 0.90 percent. Britain's FTSE 100 rose 1.99 percent, Germany's DAX index added 1.99 percent, and France's CAC-40 jumped 2.73 percent.