February 28, 2024

Stocks and Bonds: Wall Street Rebounds on Europe Hopes

At the close of trading, the Dow Jones industrial average was up 2.5 percent, adding 272.38 points, to 11,043.86. The Standard Poor’s 500-stock index rose 2.3 percent, or 26.52 points, to 1,162.95. The Nasdaq composite index was up 1.35 percent, or 33.46 points, to 2,516.69.

A spokesman for the European Commission confirmed that discussions were under way on plans to extend the effectiveness of the euro zone’s bailout fund, perhaps expanding the borrowing power of the fund but not the amount of money that nations were contributing. But as has often been the case, European leaders on Monday seemed to have different perceptions of what was being discussed and how likely it was that the proposals would find support.

Even so, investors moved to buy stocks and drove down the prices of safe haven assets like Treasury bonds and gold. Analysts said that the markets’ response showed the hunger for a political solution to Europe’s sovereign debt crisis, as well as a belief that stocks might have dropped too far in recent days.

“People woke up this morning, looked at some vaguely positive news in Europe and said, you know what, I’m willing to take a shot with stocks at these levels,” said Kevin H. Giddis, the executive managing director and president for fixed income capital markets at Morgan Keegan Company.

Monthly new-home sales in the United States hit a six-month low in August at a seasonally adjusted annual rate of 295,000 homes, down from 302,000 in July. Prices were down 8.7 percent, the Commerce Department reported. Separately, a forecast of third-quarter earnings based on data by Thomson Reuters predicted that the earnings of S. P. 500 companies would rise 13.7 percent, down from an earlier forecast of 17 percent.

Markets have tumbled in recent weeks on grim economic news. Wall Street suffered through one of its worst days of the year on Thursday after the Federal Reserve said it saw “significant downside risks” to the country’s economic outlook. But analysts say that the markets have grown somewhat numb to such news.

Gold prices were down for a fifth consecutive day. They fell more than $100 before recovering to settle at $1,622 an ounce, down from a peak of nearly $1,900 on Aug. 22. Analysts attributed the drop to investors looking for cash, but some also described it as a correction for a commodity that has reached nominal record highs in recent weeks. But James Steel, an analyst at HSBC, said that the dip was an indication of volatility in an uncertain market, rather than a sign that the market for gold may be turning.

“The issues that have pushed the market up for the last three years — the E.U. sovereign debt issues, our mounting debt issues, the structural issues in the dollar, and geopolitical risks — none of those have been solved in the last four days,” he said. “That would argue that the bull market in gold is not over.”

Interest rates rose. The Treasury’s benchmark 10-year note fell 21/32, to 102, and the yield rose to 1.90 percent, from 1.83 percent late Friday.

In Europe on Monday, the benchmark Euro Stoxx 50 closed up 2.8 percent, and the DAX in Frankfurt closed up 2.9 percent. The FTSE 100 in London rose 0.5 percent.

In the Asia-Pacific region, stocks declined, compounding the sharp falls they had suffered during the previous week. In Japan, the Nikkei 225 index dropped 2.2 percent, ending at 8,374.13 points. The Kospi in South Korea ended down 2.6 percent and the Taiex in Taiwan declined 2.4 percent on Monday. The Hang Seng was 1.5 percent lower.

A technical issue kept the Dow from accurately updating for 12 minutes at the beginning of trading in New York. The index opened flat as its component stocks and other indexes rose in the minutes after the opening bell. A press officer for the index said the problem had been fixed.

Matthew Saltmarsh and Bettina Wassener contributed reporting.

Article source: http://www.nytimes.com/2011/09/27/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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