Stocks rose sharply on Monday, bolstered by a renewed pledge by France and Germany to come up with a plan by the end of the month to tackle the euro zone debt crisis and support the region’s banks.
On Wall Street, the Standard Poor’s 500-stock index closed up 3.4 percent, gaining 39.40 points to 1,194.87. The Dow Jones industrial average rose 329.53 points to 11,432.88, a rise of 3.0 percent, and the Nasdaq composite index added 3.5 percent. Trading volume of stocks in the S.P. 500 was down more than 36 percent from the average of the previous week because of the Columbus Day holiday in the United States. Traders said that the lower volume played a factor in the magnitude of the gains. The bond market was closed.
In Europe, the Euro Stoxx 50 closed up 2.3 percent. The FTSE 100 in London was up 1.8 percent and the DAX in Frankfurt rose 3 percent. Europe’s main volatility index dropped to its lowest level since early September.
“We’re getting signals on a lot of fronts that the end of the crisis is coming,” said Valerie Gastaldy, head of the Paris-based technical analysis firm Day By Day.
The S.P. 500 is now up more than 10 percent from a low last Tuesday that took the index briefly into a bear market. The advance has been driven by short-covering and managers buying stocks as they try to catch up to the sharp rally, analysts said.
Over the weekend, the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, said they would work out a plan to recapitalize European banks, come up with a sustainable answer to Greece and accelerate economic coordination in the euro zone by the time of a Group of 20 gathering in Cannes, France, on Nov. 3-4.
“Recapitalizing the banks would be a strong signal sent to the market, even if banks don’t necessarily need fresh funds,” said Benoit de Broissia, an analyst at KBL Richelieu. The euro gained about 2 percent on the dollar, trading at $1.3648.
“What’s happening is traders are shorting the dollar, and using funds there, and piling into risk-based assets,” including equities, said Fred Dickson, chief market strategist at the Davidson Cos. in Lake Oswego, Oregon.
A move to nationalize Franco-Belgian bank Dexia was seen by some traders as an indication that governments would step in and keep large lenders from going under.
Article source: http://www.nytimes.com/2011/10/11/business/daily-stock-market-activity.html?partner=rss&emc=rss
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