Stocks are in rally mode this Thursday, adding to gains after the board that sets U.S. accounting standards agreed to give banks more flexibility in applying mark-to-market accounting to their toxic assets.

At 12:41 pm ET, the Russell 2000 (NYSE:IWM) is up 24.71, or 5.76%, at 453.87, while the Dow is up 3.88% at 8,062.59 and the S&P 500 is soaring 4.04% at 843.87.

Small caps on the move today include Stein Mart, Inc. (Nasdaq:SMRT), up 22% today, and Century Aluminum (Nasdaq:CENX) is also treading 26% higher.

******Unemployment numbers continue to rise, but investors are more focused on the hope that the economy has bottomed and may be positioning for recovery. At least for now.

Please note that I said “positioning for recovery.” Mortgage rates are down and that seems to be helping the housing market a little. Credit afforded by the Treasury aimed at removing toxic assets from banks is resulting in higher valuations for those banks.

But all of the steps that have been taken are in their infancy. How long will it take to work off the available inventory in the housing market? Will banks and private investors come to an agreement on acceptable prices for toxic assets?

These questions will be answered over time. And it should go without saying that there’s plenty of room for disappointment down the road.

*****The Public-Private Investment Program could create some very low risk profits for its participants. That’s because the Treasury and the Fed are . . .

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