Some traders say that the market is gaining momentum from its recent gains and have begun pointing to signs that the market’s extreme volatility may be giving way to a calmer period. But with all eyes on Europe, even optimists acknowledge the fragility of the recent confidence.
The Dow Jones industrial average closed up 102.55 points, or 0.9 percent, at 11,518.85. It spent much of the day in positive territory for the year before giving up some of its gains in the last hour.
The index was positive for most of the year before plunging in early August. Since then, stock prices have experienced a series of wrenching ups and downs, closing in positive territory for the year only once.
The index closed on Wednesday 0.5 percent below its level at the beginning of 2011.
The Standard and Poor’s 500-stock index, seen as a more complete barometer of the overall market, was up 11.71 points, or 1 percent, at 1,207.25. It remains down more than 3 percent for the year. The Nasdaq composite index rose 21.70 points, or 0.8 percent, to 2,604.73.
Banks continued to make particularly strong gains. Citigroup gained 4.9 percent, while Wells Fargo’s shares were up 3.5 percent.
The European Commission president, José Manuel Barroso, proposed that Europe’s biggest banks be required to temporarily bolster their protection against losses, as part of a broader plan to restore confidence in the European financial system. He also called on the 17 European Union members that use the euro to maximize the capacity of their bailout fund, a clear hint that he favors leveraging the fund to increase its power.
Slovakia is expected to approve changes to the rescue fund, known as the European Financial Stability Facility, on Thursday or Friday.
Lawmakers there initially rejected the bill shortly after markets in the United States closed on Tuesday. The vote led to the collapse of the country’s coalition government, but the parties in the departing government reached an accord with the main opposition party to permit the bill to pass in exchange for early elections.
The other 16 E.U. members that use the euro have approved the measure, which requires unanimous support.
Analysts said recent turmoil in the markets had effectively forced European leaders to show real progress in addressing problems related to sovereign debt.
“The market has screamed loud enough to make the European authorities stand up and listen,” said Andrew Wilkinson, chief economic strategist for Miller Tabak Company.
Some traders also pointed to the falling level of the VIX, which measures volatility, as a sign that markets could be stabilizing. The VIX, popularly known as the fear index, ended at 31.26, its lowest level since mid-September. In addition to positive signs in Europe, the markets were adjusting to a slightly brighter picture of the domestic economy, said Michael Church, president of Addison Capital. A recent spate of economic data has eased fears among economists that a recession is imminent.
“At some point you had to question that thesis, especially when it had become exceptionally popular,” Mr. Church said.
The minutes from the most recent Federal Open Market Committee meeting were released on Wednesday. They showed that two members had favored more aggressive action to stimulate the economy, essentially putting fears of a further slowdown ahead of inflation concerns.
European markets closed higher Wednesday. The benchmark Euro Stoxx 50 index was up 2.43 percent; the FTSE 100 in London rose 0.85 percent; and the DAX in Frankfurt gained 2.2 percent.
The euro, which has been gaining against the dollar for over a week, rose 1.1 percent to $1.3677.
Yields on United States Treasuries also continue to rise. The yield on the benchmark 10-year note was 2.21 percent, up from 2.16 late Tuesday.
This article has been revised to reflect the following correction:
Correction: October 12, 2011
An earlier version of this article erroneously reported the yield on the 30-year bond — rather than the 10-year note — as 2.214 percent.
Article source: http://feeds.nytimes.com/click.phdo?i=83b46f659556953133f08d64b0422e81
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