Wall Street Resumes Rally on Easing Euro Debt Fears
Stocks rose Wednesday as investors brushed off fresh worries about the health of European banks to resume a rally.
Strong demand at an auction for Portugal’s debt early Wednesday helped relieve some concerns that resurfaced this week about the health of Europe’s banking industry.
The Dow Jones industrial average rose about 70 points in late morning trading. Broader indexes also rose moderately.
David Chalupnik, head of equities at First American Funds, said it was critical to see support for the Portuguese auction because it helped turned market sentiment “a little more positive.” European markets reversed their losses after the results of the auction were announced.
Financial stocks got a lift from the dwindling concerns about Europe’s banks, including UBS AG, which fell sharply Tuesday. JPMorgan Chase & Co. was one of the biggest gainers among U.S.-based banks.
Energy stocks benefited from BP PLC’s credit rating being raised by Fitch. BP also released an internal report that largely deflected blame from the oil spill in the Gulf of Mexico to rig owner Transocean Ltd. and contractor Halliburton Co.
Worries about how European government debt might drag down a global recovery halted a four-day winning streak Tuesday. Stocks rallied last week after reports on manufacturing and employment were better than expected.
A report due out Wednesday afternoon from the Federal Reserve could provide further insight into the pace of the domestic recovery. The Fed’s “beige book” report will break down economic activity across the country by region.
The Fed has been cautious in its statements about the economy in recent months. Any signs of encouragement from the central bank could be considered further confirmation of last week’s economic reports and restart the rally.
In late morning trading, the Dow rose 70.46, or 0.7 percent, to 10,411.23. The Standard & Poor’s 500 index rose 8.48, or 0.8 percent, to 1,100.32, while the Nasdaq composite index rose 20.64, or 0.9 percent, to 2,229.53.
Britain’s FTSE 100 rose 0.5 percent, Germany’s DAX index gained 0.8 percent, and France’s CAC-40 rose 0.9 percent.
About four stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 201.8 million shares. Volume remains light, which means many traders are avoiding stocks altogether. Many investors are waiting to get a better sense of the pace of recovery and to see what might happen during November’s elections.
Rick Fier, an equities trader at Conifer Securities, said the elections more than the economy are likely to be the catalyst that moves the market higher in the coming months. Traders are assuming that the recovery will be slow and uneven, but growth will remain in place over the next few months, he said.
Uncertainty about potential tax increases and the costs associated with health care and financial regulatory reform have helped to keep businesses from hiring, which in turn has slowed the recovery. The results of the elections should provide businesses and investors with a clearer sense of those issues.
In corporate news, women’s clothing retailer Talbots Inc. said its fiscal second quarter profit rose, but its outlook for the third quarter fell short of expectations. Shares dropped 54 cents, or 4.9 percent, to $10.58 on the cautious outlook.
BP shares rose $1.18, or 3.2 percent, to $38.37. Halliburton rose 26 cents to $30.10.
UBS climbed 12 cents to $17.64 a day after tumbling because of worries about the health of European banks. JPMorgan Chase rose 80 cents, or 2.1 percent, to $39.08.
U.S. Treasury prices fell as investors moved back into riskier stocks. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.66 percent from 2.60 percent with late Tuesday. Its yield is often used to help set interest rates on mortgages and other consumer loans.
STEPHEN BERNARD, AP Business Writer NEW YORK