Stocks rise on hopes for resolution to Europe mess
NEW YORK—European leaders moved more decisively Wednesday to control the region's debt crisis, and sent stocks sharply higher. The Dow Jones industrial average gained 102 points and closed at its highest level since late August.
The Dow had been up as many as 209 points, but gave up half that gain in the last hour of trading. Late-day reversals have become increasingly common in the market. So have point changes of more than 100 points.
"Unfortunately I think we're stuck with the wild volatility that we've had for some period of time. I don't think we've moved past it," said Dennis Wassung, a portfolio manager at Salem, Mass.-based Cabot Money Management.
The Dow has rallied 8.1 percent since last Tuesday, when it hit its lowest point of the year, 10,362.26. The Standard & Poor's 500 index has risen even more in that time, 9.8 percent. That's the biggest 7-day jump for the S&P since March 2009, when the market hit 12-year lows.
The surge is even more remarkable considering that it came right after the S&P 500 nearly entered a bear market. On Oct. 4, it traded below 1,090, a 20 percent drop from its recent peak in April. Had it closed at or below that level, it would have entered what stock watchers call a bear market.
Much of the surge in stocks since last week was due to new efforts by European leaders to contain the continent's debt problems. On Wednesday, European Commission President Jose-Manuel Barroso presented a plan to strengthen European banks and lower Greece's debt. Greece is still waiting to receive the next installment of its emergency loans. However, there is a growing belief that even those loans won't prevent the government from defaulting on its debt.
Separately, a Slovakian opposition party leader said that country's political parties have agreed to approve a deal to strengthen Europe's financial rescue program. Slovakia's parliament blocked the deal Tuesday. That set back efforts to free up more funds for indebted European countries and banks.
The Dow rose 102.55 points, or 0.9 percent, to close at 11,518.85. The average is now down just 0.5 percent for the year. The Dow has closed up or down at least 100 points in 11 of the past 13 trading days.
The S&P 500 rose 11.71, or 1 percent, to 1,207.25. The S&P is down 4 percent for 2011.
The Nasdaq composite index rose 21.70, or 0.8 percent, to 2,604.73.
Banks and financial stocks had the biggest gains in the S&P 500. Those companies would have the most to lose if European banks suffer big losses because of a default by the Greek government. A default would cause the value of Greek bonds held by banks in Europe to plunge, weakening their balance sheets and making it harder for them to lend. Their financial problems would likely hurt other banks, including those in the U.S., and could hobble global credit markets.
European leaders are working to shore up those banks so they can withstand the impact.
The euro rose to $1.38 against the U.S. dollar from $1.37 late Tuesday. The euro has fallen in recent months as Europe struggled to control its debt crisis. Treasury prices fell and their yields rose as investors bought riskier assets like stocks instead of U.S. government debt. The yield on the benchmark 10-year note rose to 2.21 percent from 2.16 percent late Tuesday. Demand was slightly weaker than average at an auction of 10-year Treasury notes.
Liz Claiborne Inc. rose 34 percent after the company said it is selling its namesake brand and several others in an attempt to reverse years of losses. Liz Claiborne hasn't had an annual profit since 2006.
U.S. companies have begun to release their third-quarter earnings reports, and so far the results have been mixed. PepsiCo Inc. rose 2.9 percent after the company said its income rose because of stronger sales of snacks and beverages, especially overseas.
Alcoa Inc. dropped 2.4 percent after the aluminum maker reported earnings that were weaker than analysts expected. A 12 percent drop in aluminum prices in the July-September period dragged down its results.