The European Central Bank, the United States Federal Reserve and three other central banks said Thursday they would provide European banks with unlimited dollar loans. The aim is to fend off worries that the banks could be weakened by their holdings of government bonds from Greece and other struggling European countries.
“It’s a pretty powerful action,” said Brian Gendreau, senior investment strategist at the Cetera Financial Group. “And it’s another piece of news that leads you to think the crisis in Europe could be on the road to resolution.”
The Dow Jones industrial average rose 186.45 points, or 1.7 percent, to close at 11,433.18.
The Standard Poor’s 500-stock index rose 20.43 points, or 1.7 percent, to 1,209.11. The index has jumped 4.8 percent this week but is still 10 points short of where it started the month.
Gold plunged $45, or 2.5 percent, to settle at $1,778 an ounce. Treasury prices fell, pushing their yields up. The Treasury’s benchmark 10-year note fell 26/32, to 100 12/32, and the yield rose to 2.08 percent from 1.99 percent late Wednesday.
The Nasdaq rose 34.52 points, 1.34 percent, to 2,607.07. The index has jumped 5.6 percent so far this week and is up 1.1 percent in September. The Dow is down 1.6 percent this month, the S. P. 0.8 percent.
Daniel Alpert, managing partner at Westwood Capital in New York, said the stock market had been overreacting to Europe’s debt crisis, swinging in response to each new development.
“Every time there’s news out of Europe that’s not bad, the market reacts positively, and that’s occurring on almost a nightly basis,” he said. “You’d think the U.S. economy might be part of what the market trades on, but the fact of the matter is, today and recently, it’s all been about Europe.”
Bank stocks led the market higher. The Goldman Sachs Group rose 3 percent to $107.97. Bank of America rose 4 percent to $7.33. Morgan Stanley jumped 7 percent to $16.59 after reporting that its chairman, John J. Mack, would step down at the end of the year.
The stock market’s gains were tempered by a mixed batch of economic reports. First-time claims for unemployment benefits rose by 11,000 last week, to 428,000. The New York and Philadelphia branches of the Federal Reserve also reported weak manufacturing in their regions.
On the positive side, factory output rose 0.5 percent in August, after increasing 0.6 percent in July. Autos and related products increased 2.6 percent, evidence that supply chain disruptions stemming from the Japan earthquake continued to ease.
Among stocks making big moves, HCA Holdings, a hospital chain, rose 12 percent to $20.84 after it said it would buy back more than $1 billion of its stock from Bank of America.
Research in Motion fell sharply in after-hours trading after falling less than 1 percent and closing at $29.54 in regular trading. The maker of BlackBerry mobile devices reported earnings and sales that came in far below Wall Street’s estimates.
The Swiss bank UBS fell 10 percent to $11.41 on news that a trader could cost the bank as much as $2.2 billion. The bank warned that it could post a loss for the quarter as a result of the unauthorized trade.
Netflix fell almost 19 percent to $169.25, the biggest drop among stocks in the S. P. 500 index, after the company said it expected fewer people to subscribe to its DVD-by-mail service as well as its streaming movie service.
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