March 29, 2023

Wall Street Rally Continues

Stocks edged higher on Monday in a trading session marked by uncharacteristic quiet after a turbulent week.

In the absence of major economic news, stocks rode a tail wind of optimism from the most recent employment numbers released on Friday and hope for more action by European authorities to address the Continent’s debt crisis.

The Dow Jones industrial average closed up 21.34 points, or 0.16 percent, at 13,117.51. The broader Standard Poor’s 500-stock index added 3.24 points, or 0.23 percent, to 1,394.23.

At one point in Monday’s trading, the S. P. was within half a point of 1,400, which it has not touched since May 3.

The Nasdaq composite index rose 22.01 points, or 0.74 percent, to 2,989.91.

The stock market fell the first four days of last week as investors, worried about the weak economy, were disappointed by the lack of specific action from the Federal Reserve and the European Central Bank. The Dow lost 197 points from Monday through Thursday.

But the Dow soared 217 points on Friday after a surprisingly strong jobs report. The American economy generated 163,000 jobs last month, far more than expected.

The upturn was seen as a sign that the United States may be resilient enough to pull out of a midyear slump and grow modestly as the rest of the world slows down.

Stock markets also rose in Europe on Monday. Speculation has been building that the European Central Bank would ultimately support struggling countries like Spain and Italy by buying bonds issued by those governments. The DAX index in Germany and the CAC-40 in France both rose a little less than 1 percent.

Spain’s IBEX 35 soared 4.4 percent despite a five-hour blackout from a technical problem that halted trading for much of the day.

“Mutual fund managers and hedge funds have sizable holdings in cash and they need to put those to work,” said Richard Cripps, chief investment officer for Stifel Financial. “There’s optimism over the progress made in Europe and also constructive news from the U.S. economy.”

Shares of the Knight Capital Group stock fell 98 cents, or 24 percent, to $3.07 on Monday after the beleaguered stock trading firm lined up financing that will allow the firm to continue to operate. Knight said a group of investors had agreed to buy $400 million of preferred stock that can be converted into a 73 percent stake in the firm.

Knight’s stock is down 70 percent since last Tuesday, the day before a software malfunction caused its computer systems to send erroneous orders flooding into the market. The firm’s future was thrown into doubt after the malfunction cost it $440 million.

Going in the opposite direction was Best Buy, which jumped $2.35, or 13 percent, to $19.99 after its founder and former chief executive, Richard M. Schulze, offered to buy the company at a premium to its stock price. Mr. Schulze, 71, is its largest shareholder with a 20 percent stake.

Cognizant Technology Solutions, the consulting company, jumped $6.34, or 11 percent, to $64.21 after its second-quarter results beat Wall Street’s estimates. The company raised its full-year earnings forecast.

The Interpublic Group, a marketing company, fell 86 cents, or 8 percent, to $10.11 after a rival, the Publicis Groupe of France, shot down a report that it was weighing a bid to buy the American advertising company.

Tyson Foods fell $1.23, or 8 percent, to $14.17 after the company reported that income dropped 61 percent in the quarter.

Pluristem Therapeutics climbed 49 cents, or 15 percent, to $3.80. The Israeli drug maker said a cancer patient’s life was saved with the use of certain cells it had developed.

The bond market was also quiet on Monday. The price of the Treasury’s 10-year note rose 1/32, to 101 22/32, while its yield was unchanged from late Friday at 1.57 percent.

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European Markets Edge Higher

Market activity was subdued, with Wall Street closed in observance of Martin Luther King’s Birthday. The Euro Stoxx 50 index, a barometer of euro zone blue chips, closed up 1 percent, and the FTSE 100 index in London rose 0.4 percent. The DAX index in Germany rose 1.25 percent. Indexes rose in France and Italy and were little changed in Spain. The euro held steady against the dollar.

As for the S. P. ratings cut last week, the agency cited a deteriorating economic situation and disappointment with leaders’ efforts to address the euro crisis. On Monday, S. P. also lowered by one notch its rating on the euro zone’s main bailout vehicle, to AA+ from AAA, in a widely anticipated move.

President Nicolas Sarkozy of France, in his first public comments since S. P. cut the country’s rating, said Monday that “in the final analysis, this doesn’t change anything.”

Speaking in Madrid at a news conference with the Spanish prime minister, Mariano Rajoy, Mr. Sarkozy said France and the other European countries that were downgraded “must cut our deficits, cut spending and improve the competitiveness of our economies to return to growth.”

Mr. Rajoy, who broke a pre-election promise by raising taxes, told journalists that he did not think additional tax increases would be necessary. He also said Spain should continue to hold a seat on the board of the European Central Bank.

Herman Van Rompuy, the president of the European Council, met Monday in Rome with Prime Minister Mario Monti of Italy. “Market players or rating agencies sometimes consider our response as incomplete or insufficient,” Mr. Van Rompuy said after the meeting, according to Bloomberg News. “Yet real progress has been made in reshaping the euro area in order to build on its fundamentals, which are on average sound.”

In its first test of investors’ appetite since the downgrade, France sold 8.6 billion euros, or $10.9 billion, of short-term debt securities on Monday at yields slightly lower than in the previous auction. The yields on the country’s 10-year bonds fell 0.04 percentage point by late Monday, to 3.014 percent.

Yields on Italian 10-year bonds edged down one basis point, to 6.581 percent, while Spanish 10-years were yielding 5.117 percent, down four basis points. A basis point is one-hundredth of a percentage point.

Reuters cited unidentified traders as saying the European Central Bank had intervened in the secondary bond market again, buying Italian and Spanish securities to relieve some pressure on yields.

Yields on German 10-year bonds, the European benchmark, were unchanged, at 1.764 percent.

The dollar was mixed against other major currencies. The euro slipped to $1.2667 by late Monday in New York from $1.2680 late Friday in New York, while the pound rose to $1.5325 from $1.5317.

Asian shares fell. The Tokyo benchmark Nikkei 225 stock average slid 1.4 percent. The Sydney benchmark index fell 1.2 percent. In Hong Kong, the Hang Seng fell 1 percent and in Shanghai the composite index declined 1.7 percent.

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Markets Slide as Greece Sets Referendum on Aid Deal

The proposed ballot will put Greek austerity measures — and potentially membership in the euro zone — to a popular vote for the first time, risking Mr. Papandreou’s political future and threatening even greater turmoil both among the countries that share the single currency and further afield.

His announcement sent tremors through Europe’s see-sawing markets on Tuesday, with bank stocks taking a particular hammering because of their exposure to Greek debt. At midday, the German DAX index was down by 5.3 per cent while the French CAC 40 had slipped by roughly 4.2 per cent. In Britain, which is not a member of the euro zone but trades heavily with continental Europe, the FTSE 100 index was down by around 3.2 percent.

President Nicolas Sarkozy of France is expected to speak with German Chancellor Angela Merkel by phone during the day on Tuesday to discuss the referendum, which took both leaders by surprise, Agence-France Presse reported. The French president was said to be “dismayed,” according to Le Monde, citing an unnamed confidant of Mr. Sarkozy.

The German Finance Ministry deflected questions in a statement early Tuesday that the call for a referendum “is a domestic political development on which the German government has no official information yet and which therefore it will not comment on.”

But Rainer Brüderle, a senior member of Ms. Merkel’s governing coalition and a former finance minister, said in a radio interview on Tuesday that he was “irritated” by the move, which he called “a strange thing to do.”

“This sounds to me like someone is trying to wriggle out of what one has agreed to,” he was quoted by Der Spiegel as saying.

Mr. Papandreou’s surprise promise of a vote on the austerity package introduced a note of uncertainty in what had seemed to be a done deal, threatening a comprehensive agreement reached by European leaders last week to shore up the euro zone. A rejection by the voters would also be likely to be treated as a vote of no confidence in the government and lead to early elections.

The anxiety stirred up by those fears hammered United States financial markets on Monday, showing once again how the domestic politics of even the smallest members of the European Union can create troubles that not only threaten the currency but reverberate around the globe.

Addressing lawmakers on Monday evening, Mr. Papandreou said the decision on whether to adopt the deal, which includes fresh financial assistance, debt relief and deeply unpopular austerity measures, properly belonged to the Greek people.

“Let us allow the people to have the last word, let them decide on the country’s fate,” he said.

It was unclear how the referendum would be worded, but Mr. Papandreou said it would be a vote on whether or not Greeks supported the debt deal and the program of austerity measures in exchange for foreign aid.

The stakes are extremely high. A no vote could break the deal between Greece and its so-called troika of foreign lenders — the European Union, European Central Bank and International Monetary Fund — which have demanded structural changes and austerity measures in exchange for aid.

Without the aid, Greece would not be able to meet its expenses and would default on its debt, sending shock waves through the euro zone and the world economy.

A yes vote, on the other hand, would move the package forward, effectively shifting responsibility for the nation’s painful economic choices from Mr. Papandreou’s Socialist Party onto the public. That outcome would help Mr. Papandreou shore up his political fortunes and avoid the instability of early elections.

The center-right opposition has opposed the bulk of the austerity program, and the prime minister’s popular support has dwindled as Greeks have been hit by a seemingly endless series of tax increases and wage and pension cuts. On Sunday, the center-left newspaper To Vima reported that a majority of Greeks viewed the deal negatively.

The leader of Greece’s main conservative opposition party New Democracy, Antonis Samaras, told reporters in Athens on Tuesday that his party would do whatever it takes to force early elections and accused Mr. Papandreou of acting selfishly by calling for a referendum.

“Mr. Papandreou, in his effort to save himself, has presented a divisive and extortionate dilemma,” Mr. Samaras said following talks with President Karolos Papoulias.

Niki Kitsantonis reported from Athens, and Rachel Donadio from Rome. Alan Cowell contributed reporting from London and J. David Goodman from New York.

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Stocks Fall in Europe for a Second Day; Asia Markets Mixed

LONDON — Stock markets in Europe fell for a second day Friday as investors braced for a speech by the chairman of the Federal Reserve and more data on the U.S. economy.

Anticipation that there would be some message from the Fed chairman, Ben S. Bernanke, on more economic stimulus at a symposium in Jackson Hole, Wyoming, had helped to push global stock markets higher at the beginning of the week but had waned by Thursday.

Markets in Asia were mixed on Friday, with the MSCI Asia Pacific index up 0.3 percent after dropping several times during the day.

“Investors are waiting what Bernanke says and I don’t think there’s a great deal of expectation in the market,” Ian Scott, global head of equity strategy at Nomura, said. “Clearly people would rather hear what he’s going say and decide their strategy after that.” Mr. Bernanke is scheduled to speak at about 8 a.m. Mountain time — about 10 a.m. in New York and 5 p.m. in London.

Mr. Scott added that Mr. Bernanke’s speech was not the only information investors were waiting for. With uncertainties around the state of the global economy continuing, investors are holding out for more economic data to back up some recent disappointing survey figures.

“It’s a question of letting time pass and see some harder data,” Mr. Scott said.

As a sign of just how jumpy some investors are, Germany’s DAX index dropped 4 percent in 15 minutes in late trading on Thursday, surprising many investors who said there did not seem to be a clear reason for the sharp drop. Some analysts blamed it on speculation about an extended short selling ban in Europe or fear of a possible cut of Germany’s credit rating, but authorities quickly denied both rumors.

Still, the nervousness spread to Wall Street, where the Standard Poor’s 500-stock index closed down 1.56 percent on Thursday. After a positive report earlier in the week on durable goods sales, the outlook for the U.S. economy darkened somewhat Thursday with a government report showed that new claims for unemployment benefits rose more than expected last week. A report by the Commerce Department on the U.S. economy is due at 8.30 a.m. Friday in Washington.

Markets continued downward Friday in Hong Kong, where the Hang Seng index was 0.86 percent lower by midafternoon, and in India, where the Sensex was down 1.1 percent by the afternoon. The Nikkei 225-stock index rose 0.3 percent after Prime Minister Naoto Kan announced his resignation.

Gold rose 0.5 percent to $1,783.57 an ounce after falling earlier. Prices of the metal fell 4.3 percent this week after reaching a record on Aug. 23. Investors were spooked by four weeks of sharp declines on the stock markets and sought a haven, traders said.

Financial regulators in France, Italy and Spain extended a ban on short selling by another month on Thursday with the aim to calm large market swings. The ban, which regulators promised to review next month, did not prevent steep drops in banking shares earlier this month.

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Growth in Euro Zone Stalls, Slowing Debt Crisis Solution

All of Europe’s main stock indexes lost ground after the data confirmed fears that government austerity programs are taking their toll on the European economy, undercutting efforts to contain the sovereign debt crisis.

Gross domestic product in the 17-nation euro area rose 0.2 percent in the second quarter of 2011 compared with the previous quarter, according to Eurostat, the E.U. statistics agency. Euro area growth was down from 0.8 percent in the first quarter.

G.D.P. growth in Germany, which has been the region’s economic locomotive, fell to 0.1 percent compared with the previous quarter, when the economy expanded 1.3 percent, the German Federal Statistical Office said. Analysts had expected growth of 0.5 percent.

“It now looks like growth is slowing in core countries too,” Christoph Weil, an economist at Commerzbank, wrote in a note. “This could intensify the sovereign debt crisis in so far as the readiness and ability of countries with high credit ratings to help crisis-stricken countries will drop as a result. This could trigger a downward spiral in economic growth.”

Instead, what impetus remains in the European economy came from countries like Austria, Belgium and Finland. Even Italy, with growth of 0.3 percent compared with the previous quarter, outperformed Germany in the second quarter.

German and Italian shares led a broad decline in European stocks Tuesday. Germany’s DAX index was down more than 2 percent at midday, as was the FTSE Italia index . The euro fell 0.8 cents to $1.437.

The German economic rebound since the recession of 2009, driven by exports of cars, machinery and other goods to China and other emerging markets, has helped counterbalance weak economies in southern Europe. If Germany slows, the challenges posed by the European sovereign debt crisis will become that much more daunting.

The German figures, which were seasonally adjusted, follow data released Friday that showed that the French economy, Europe’s second-largest after Germany’s, did not grow at all in the second quarter. Slower growth means that tax receipts will also grow slowly, which will make it harder for Germany and France to support countries like Italy and Spain that are finding it increasingly difficult to borrow money at interest rates they can afford.

However, slower growth might lead to lower inflation, which will give the European Central Bank more leeway to keep interest rates low and intervene in bond markets. Since last week, the bank has been buying Italian and Spanish debt on the open market to hold down yields, which had risen above 6 percent, a rate that would have eventually proved ruinous for the two countries.

The slowdown in Germany was caused by slower household consumption and construction investment, the German statistics office said. In addition, imports rose faster than exports and led to a buildup of inventories.

Analysts at Commerzbank said that a warm spring meant that construction projects in Germany had begun earlier than usual, subtracting some activity from the second quarter. Without that effect, growth for the quarter would have been 0.4 percent, they said.

The slowdown in Germany came despite an increase in the number of people employed. The statistics office said 41 million people were employed in Germany, an increase of 553,000 people, or 1.4 percent, from a year earlier, according to preliminary figures.

The slowdown was foreshadowed by results from companies like Deutsche Bank and Siemens in recent weeks that fell short of analysts’ expectations, and it reinforced the feeling that the extraordinarily fast pace of German economic growth was flattening. E.On, the largest German utility, said last week that it might need to cut as many as 11,000 jobs after experiencing its first loss in a decade.

E.On attributed the loss chiefly to the government’s decision to force some of the company’s nuclear power plants to close early, but sales declines in foreign markets like Britain and Hungary also played a role.

Greece is already in recession, while growth in Spain is slowing down more than expected this year. The Portuguese government expects the economy to contract 2.3 percent this year, compared with a previous forecast for a 2 percent decline.

However, Eurostat said the Portuguese economy was stagnant in the second quarter, an improvement over a decline of 0.6 percent in the first quarter.

The euro area trade surplus also improved slightly in June, to €900 million from €200 million in May, Eurostat said. Germany’s surplus of €9 billion remained by far the largest of any European country.

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Stocks & Bonds: U.S. and European Markets Rise on Optimism Over Greek Vote

A relief rally swept the European and American markets after an early Wednesday vote by the Greek Parliament to approve an austerity plan.

The plan was passed, a condition set by international lenders for providing more financing and preventing a default, after weeks of uncertainty in financial markets related to the debt problems in the euro zone.

Investors had been bracing for the Greek Parliament’s decision on the package, which includes unpopular wage cuts, tax increases and privatizations. While investors got some relief with the announcement that it had passed, analysts warned that unresolved fiscal issues remained.

“Today’s vote will certainly give some short-term relief to markets, but concerns about the long-term feasibility of Greece’s fiscal plans still remain in place,” said Diego Iscaro, an IHS Global Insight senior economist, in a research note after the vote.

Protests continued outside the Parliament building in Athens. A second vote was scheduled for Thursday on enabling legislation to set the timing of the privatizations, especially of Greece’s state-owned electric utility.

With so much anticipation before the vote, analysts said that by the time it took place, investors had fixed positions.

“This is classic ‘buy the rumor, sell the news,’ ” said Phil Orlando, chief equity market strategist at Federated Investors. “The equity market was up in anticipation. We priced it in ahead of time.”

Still, the news was enough to lead major indexes higher. The DAX index in Frankfurt closed up 1.7 percent at 7,294.14, while the FTSE 100 in London rose 1.5 percent to 5,855.95.

In the Asia-Pacific region on Thursday, the reaction was muted, with the Nikkei 225 flat by the midday break in Tokyo. On Wednesday, the Nikkei had risen 1.5 percent on optimism that the Greek Parliament would pass the austerity measures.

Stocks in South Korea edged up 0.3 percent on Thursday, and Singapore and Taiwan climbed 0.7 percent. In Hong Kong, the Hang Seng index was 1.7 percent higher by midmorning.

In the United States, the Dow Jones industrial average closed up 72.73 points, or 0.60 percent, at 12,261.42. The Dow has now risen every day this week, putting it up 326.84 points, or 2.74 percent, in that period.

The Standard Poor’s 500-stock index was up 10.74 points, or 0.83 percent, at 1,307.41 and the Nasdaq composite index was up 11.18 points, or 0.41 percent, at 2,740.49.

The Treasury’s 10-year note fell 24/32, to 100 1/32. The yield rose to 3.12 percent, from 3.03 percent late Tuesday.

Bank stocks helped lift the Dow, and Bank of America was the most actively traded in the broader markets’ financial sector, which rose more than 2 percent. Bank of America, which said it would set aside $14 billion to pay investors who bought securities it assembled from mortgages that later soured, rose nearly 3 percent to $11.14. The company said it expected the agreement to lead to a second-quarter loss of $8.6 billion to $9.1 billion.

Citigroup was up more than 3 percent at $41.50. Morgan Stanley rose 4.75 percent to $23.39.

Other sectors that forged ahead were materials and energy, which each closed more than 1 percent higher. Oil closed up $1.88 at $94.77.

Yields on benchmark 10-year Spanish, Portuguese and Greek bonds declined, while those in safer equivalents issued by Germany and France rose, indicating investors were willing to switch back into riskier securities.

 The euro ended the day at $1.4431, up slightly from $1.4370 Tuesday.

The agreement by Greek lawmakers on the austerity measures was a crucial step in the international rescue of the crippled economy, and the relatively muted market reaction to the vote showed that investors knew that the country’s financial troubles were far from over.

“What’s really important is not the vote itself,” said George Magnus, senior economic adviser at UBS in London, “but the implementation of what they’re voting on, and that’s where the programs will come unstuck.”

The vote was critical to unlocking near-term financing, specifically the disbursement of the fifth installment of the original 110 billion euro bailout for Athens (roughly $140 billion when agreed to last year).

That installment would be worth 12 billion euros and would enable Greece to meet obligations like bond coupon payments in July, while paving the way for a new international lending program to provide financing through 2014.

Euro area ministers are expected to provide details of the program on July 3.

In a research report released Tuesday, Citigroup analysts said: “Despite the aid package, eventual Greek haircuts may be inevitable, with estimated private sector haircuts of 65 to 77 percent,” referring to the write-downs that bond holders will be required to accept.

“In other words, a bailout package addresses the liquidity issue much more than the solvency issue,” Citigroup said.

Two Commerzbank analysts, Benjamin Schröder and Peggy Jäger, said early Wednesday that “even if the bills are passed, worries could still linger on for longer, if no broader consensus across Greek political parties forms.”

Bettina Wassener contributed reporting from Hong Kong.

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