Stocks Rise on Signs of Europe Growth

Stocks extended their rally to a third day Monday following signs that Europe’s debt crisis isn’t devastating the region’s economy.

The Dow Jones industrial average rose about 60 points in afternoon trading after being up by as much as 118. The Dow has risen 312 points in the past two days.

Traders seemed unfazed by news that credit rating agency Moody’s lowered its rating on Greece’s debt to “junk” status. Only weeks ago, that would have sent stocks tumbling on fears that problems in Europe were worsening. But traders don’t have any illusions about the financial problems Greece is facing so the news wasn’t a surprise.

Major European markets closed higher following a report that industrial production in the 16 countries that use the euro grew more than expected in April. The euro also rose, climbing back above $1.22 for the first time since June 4. The euro did pull off its highs following the downgrade of Greece’s debt.

The production report was encouraging because investors have been concerned that government spending cuts aimed at slashing debt would hurt Europe and slow a global recovery. However, there have been few signs so far that the steep budget cuts needed to contain rising debt in countries like Greece, Spain and Portugal have slowed economies around the world.

“The fear factor of the debt crisis over in Europe — everyone seems to have digested it a little bit,” said Larry Rosenthal, president of Financial Planning Services in Manassas, Va.

The market’s gains came on light trading volume. That indicates that the market could be rising because there are fewer people rushing to sell and not necessarily more traders looking to buy. Advances on light volume can quickly unravel if traders are hit with more bad news.

Most stocks rose but shares of BP PLC and Transocean Ltd. fell because of the fallout from the Gulf of Mexico oil spill. BP shares dropped 8.9 percent on concerns that the company will suspend its dividend to ease political pressure it is facing in the U.S. The board is weighing whether to stop the $2.63 billion payout scheduled for June 21. Transocean Ltd., owner of the rig that exploded and set off the leak, fell 3.3 percent.

Retail stocks rose for a sixth straight day after easing worries about Europe raised hopes that a U.S. recovery will continue and that consumers will ratchet up spending. Macy’s Inc. rose 3.1 percent, while Nordstrom Inc. added 3.4 percent.

Dan Wantrobski, director of technical research at Janney Montgomery Scott in Philadelphia, expects the markets to be choppy for some time. The back-and-forth could push skittish investors from the market and boost the chances that the market slides again this summer.

“The longer we wait here in this kind of purgatory, the more the likelihood we can break through,” he said, referring to another drop in the markets. He wouldn’t be surprised to see the Standard & Poor’s 500 index fall to the 950-1,000 level this summer. That’s a drop of 8 percent to 13 percent.

In the final hour of trading, the Dow rose 59.61, or 0.6 percent, to 10,268.21. The S&P 500 index rose 6.57, or 0.6 percent, to 1,098.17, while the Nasdaq composite index rose 17.34, or 0.8 percent, to 2,260.94.

The market adding to a rally that sent the Dow to its best week since mid-February. The Dow jumped 2.8 percent last week in volatile trading, ending a three-week losing streak. The gains didn’t come from a steady climb, however. Stocks routinely sold off or rallied during the final hours of trading each day.

Bond prices fell Monday after investors moved into riskier assets like stocks and oil. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.30 percent from 3.24 percent late Friday.

Crude oil rose $1.34 to $75.12 per barrel on the New York Mercantile Exchange. Gold fell but pared its losses after the downgrade of Greece debt.

BP fell $3.01, or 8.9 percent, to $30.96, while Transocean fell $1.54, or 3.3 percent, to $45.31. Other energy stocks rose. Chevron Corp. advanced 84 cents, or 1.1 percent, to $74.90.

Macy’s rose 65 cents, or 3.1 percent, to $21.89, while Nordstrom climbed $1.30, or 3.4 percent, to $39.15.

About four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 749 million shares compared with 674 million traded at the same point Friday.

The Russell 2000 index of smaller companies rose 6.71, or 1 percent, to 655.71.

Britain’s FTSE 100 rose 0.7 percent, Germany’s DAX index gained 1.3 percent, and France’s CAC-40 rose 1.9 percent. Japan’s Nikkei stock average rose 1.8 percent.

STEPHEN BERNARD, TIM PARADIS, AP Business Writers NEW YORK