Stock Futures Rise on Greek Austerity Vote
NEW YORK (TheStreet) -- U.S. stock futures advanced Monday after Greek lawmakers passed a package of austerity measures to satisfy the terms for a bailout from the country's international creditors.
Futures for the Dow Jones Industrial Average were up 83 points, or 89 points above fair value, at 12,850. Futures for the S&P 500 were up 9.3 points, or 10.4 points above fair value, at 1350. Futures for the Nasdaq were up 16.7 points, or 20.4 points above fair value, at 2565.
The market welcome Greece's drastic plans to cut spending and wages, even as economists said that these same measures may be detrimental to the country's long-term growth. Riots spread across Athens overnight, with thousands of people protesting the latest round of stringent demands from Greece's creditors.
While several of the country's leaders have defected in recent days, roughly two-thirds of the Greek parliament voted to pass the new austerity measures. The agreement also outlines a bond-swap plan between the government and private lenders that will reduce the country's debt by €100 billion.The austerity legislation should now clear the way for eurozone finance ministers to give Greece its second bailout of at least €130 billion, or $171.5 billion. Officials are expected to meet in Brussels on Wednesday to determine whether Greece will get its next round of bailout aid. Borrowing costs fell at an Italian debt auction Monday, suggesting that investors' faith in the country to repay its debts had increased. The country was able to sell more than €12 billion of bills at rates lower than those in the previous sales. Germany's DAX was up 0.78% while London's FTSE was up 0.99%. Japan's Nikkei Average settled up 0.58% and Hong Kong's Hang Seng was up 0.5%. Despite apparent exuberance in the market, investors are wary of an imminent pullback. "Not everyone can enjoy a meal without putting the fork down every now and again. And the same goes for equity price advances," writes Sam Stovall, chief equity strategist with S&P Capital IQ. Stovall's team recently downgraded information technology, one of the "higher-flying" sectors. "We believe it is more susceptible than most to a sharp, short-term decline in price. However, that doesn't mean our year-end target of 1400 for the S&P 500 is in jeopardy," he adds. Last week, U.S. stocks saw the worst slide yet in 2012. The Dow slipped 61 points as investors feared that Greece was headed for a default and as technical analysis suggested that a market top had arrived.
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