US stocks jumped and blue chips clawed back more than one-third of last week’s steep losses this morning, as investors bet efforts will be taken to stem Europe’s sovereign-debt crisis.
The Dow Jones Industrial Average climbed 272.38 points, or 2.53 per cent, to 11,043.86, in choppy trading that saw the measure leap to an early triple-digit gain, give back almost all of it midsession and then move higher still.
The activity follows the Dow’s biggest weekly point drop since October 2008. Worries of a Greek default and further turmoil in global markets have driven sentiment in US markets for weeks.
The Standard & Poor’s 500-stock index gained 26.52 points, or 2.33 per cent, to 1162.95. The Nasdaq Composite was the laggard, gaining 33.46 points, or 1.35 per cent, to 2516.69, after spending much of the day in negative territory.
Early this morning, the Australian dollar rose to US98.24c, up from US96.47c late yesterday. The more upbeat mood also sent US treasury prices lower. Treasury prices skidded to session lows in late-afternoon trading, with the yield on 30-year bonds bouncing nearly 12 basis points to 2.992 per cent.
US stocks closed near session-highs following reports a “special purpose vehicle” to help stem Europe’s debt-crisis contagion was in advanced development. Those reports followed a European Central Bank official’s endorsement of a more aggressive bailout plan and another official’s remark the ECB can’t rule out an interest-rate cut.
“The market’s jolting from headline to headline,” said Quincy Krosby, Prudential Financial market strategist. “If you’re someone who is shorting the market, you don’t want to be short. You could come in…and (European leaders could) come up with some credible-sounding solution.”
Technology stocks were the session’s underperformers.
Apple lost 0.3 per cent after Wall Street analysts speculated the company is planning iPad production cuts. Also weighing on the technology sector, Freescale Semiconductor Holdings lowered its quarterly sales outlook, adding to recent warning signs from chip companies. The stock fell 1 per cent. MEMC Electronic was one of the S&P 500′s weakest stocks, shedding 2.8 per cent.
The financial sector was the strongest in the S&P 500. JPMorgan was the strongest blue chip, rising 7 per cent, followed by Bank of America, which gained 4.6 per cent.
Boeing advanced 4.2 per cent after the aerospace and defense company delivered its first 787 Dreamliner to Japan’s All Nippon Airways on Sunday.
Berkshire Hathaway’s Class B shares gained 8.6 per cent. The company’s board approved a plan to buy back its stock, an indication chairman Warren Buffett believes the shares are undervalued.
In economic data, new-home sales fell for the fourth straight month in August, another discouraging sign on the state of the battered housing market. The Federal Reserve Bank of Chicago’s National Activity Index showed a weak reading for August. By Brendan Conway, The Australian
