NEW YORK - FINANCIAL markets were higher on Thursday as lawmakers moved closer to hammering out a deal aimed at reviving the crippled financial system. Stocks rose on optimism about the deal but a credit market squeeze remained as doubts about the proposed plan's effectiveness drove demand for short-term, safe-haven assets.

Disappointing readings on employment and demand for big-ticket manufactured goods, as well as a sobering forecast from General Electric Co, underscore the broad effects of the more than year-old credit crisis.

Investors were hopeful that a US$700 billion (S$994 billion) bailout plan would win approval, albeit with some important changes, following two days of testimony on Capitol Hill by the country's top economic leaders. The momentum intensified on Thursday as President George W. Bush summoned congressional leaders to a meeting aimed at securing the legislation.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke urged lawmakers on Tuesday and Wednesday to quickly sign off on the plan, which would help prop up the economy by removing billions of dollars in risky mortgage-related assets from financial firms' balance sheets. The president highlighted the urgency in a national address on Wednesday night.

White House officials have yielded to a key demand by congressional leaders, agreeing to include widely supported limits on pay packages for executives whose companies benefit. Major elements are still being worked out, including how to phase in the mammoth cost of the package and a plan to let the government take an ownership stake in troubled companies as part of the rescue.

Strained credit markets tightened further, suggesting investors are waiting to see the details.

Demand remained for the 3-month Treasury bill, considered the safest short-term investment, with the yield trading at 0.55 percent, up from 0.49 per cent 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 was unchanged at 3.81 per cent from late Wednesday.

GE fell 74 cents, or 3 per cent, to $23.85 after lowering its forecast for third-quarter and full-year earnings, citing unprecedented weakness and volatility in the financial services markets. That disappointing news shaved some of the gains in stock index futures.

In the first hour of trading, the Dow Jones industrial average rose 77.02, or 0.71 per cent, to 10,902.19.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 7.13, or 0.60 per cent, to 1,193.00, and the Nasdaq composite index rose 13.06, or 0.61 per cent, to 2,168.74.