Bailout buzz is back in the US as stocks rise
US stocks took their cues from Europe’s troubled debt markets yesterday, staging a comeback rally to end up more than one per cent as Spanish bond yields came off euro-era record highs.
Trading has been choppy this week as investors struggle for clarity on whether the €100bn bailout for Spanish banks agreed over the weekend will be effective.
Economically sensitive sectors that had sold off recently were the strongest performers, suggesting investors saw value in beaten down shares, while traders looked for an oversold bounce as the S&P 500 slipped back toward 1,300.
“We are just being held hostage by all the news flow,” said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago. “I don’t think anyone has a handle on this.”
Materials, financial and industrial shares were the biggest gainers, up over 1.5 per cent.
Boeing led the Dow, climbing 3.4 per cent, helped by an upgrade by Sanford C Bernstein, which said it saw a better outlook for the company’s new Dreamliner plane.
For the week so far, the S&P is close to flat, reflecting the uncertainty in the market.
For the day the Dow Jones industrial average gained 162.57 points, or 1.31 per cent, to 12,573.80. The Standard & Poor’s 500 Index rose 15.25 points, or 1.17 per cent, to 1,324.18. The Nasdaq Composite Index added 33.34 points, or 1.19 per cent, to 2,843.07.
Trading was volatile yesterday. Wall Street dipped earlier as yields on Spain’s 10-year bond hit 6.86 percent, the highest level since the 1999 launch of the euro, pointing to stress in the nation’s debt markets shortly after the bailout deal.
Investors are also staring down the barrel of upcoming elections in Greece. The weekend ballot is viewed as a major risk that could result in the country leaving the Eurozone, but it could also spark a rally if the outcome favors Greece’s bailout agreement with international lenders.
“It’s certainly possible that we recover all the May losses, I think that is on the table,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC.
In corporate news, Nasdaq halted short-sales of Zynga as shares of the social gaming company plummeted 10.3 per cent on increased concerns that the craze for games on Facebook has already peaked.
Also in company news yesterday, shares of Michael Kors Holdings jumped 7.6 per cent to $41.10 after the designer clothing company reported a stronger-than-expected fourth-quarter profit and gave a full-year outlook that exceeded Wall Street’s forecast.