Stocks Hold Gains Despite Reports of Eurozone Rift
NEW YORK (TheStreet) -- Stocks finished with solid gains Tuesday, led by the basic materials and energy sectors, despite reports of disagreement in the eurozone regarding the second installment of Greece's bailout package.
The major U.S. equity indices backed off session highs in the final stretch of trading on Tuesday after a Financial Times report said as many as seven of the eurozone's 17 members are demanding that private creditors take bigger writedowns on their holdings of Greek bonds. Earlier in the afternoon, stocks surged on news that the Greek Parliament had approved new property tax law, which was considered crucial for the debt-laden country to get its next bailout installment.
The Dow Jones Industrial Average gained 147 points, or 1.3%, to close at 11,191 after surging by as many as 325 points on news of the Greek property tax resolution. The S&P 500 added 12 points, or 1.1%, to settle at 1175 and the Nasdaq finished up by 30 points, or 1.2%, at 2547.
Stocks rallied Monday as global markets cheered reports of a plan to expand the eurozone rescue fund, also known as the European Financial Stability Facility, and allow it to borrow funds from the European Central Bank. The facility would then be able to inject liquidity into European banks if countries default on their debt. Whether such a plan can gain backing from European Union members and the central bank, however, remains uncertain.The FTSE in London gained 4% while the DAX in Frankfurt closed up 5.29%. Overnight, in Asia, the Hong Kong's Hang Seng surged 4.15%, and Japan's Nikkei finished up 2.82%. "The market is perceiving that policymakers are willing to work together ever so slightly more," says Jeffrey Friedman, senior market strategist at MF Global. Friedman said that he remains cautious on whether Europe can come up with a long-term plan to stem its huge sovereign debt problems. With the market extremely sensitive to headlines from Europe, analysts have questioned whether this recent rally will fade, especially if discussions in Europe continue to drag without yielding a solution. Basic materials and energy stocks were the session's best performers with Chevron (CVX) and DuPont (DD) among the Dow's top gainers. Hewlett-Packard (HPQ), however, held the top position throughout Tuesday's session, posting a 3.9% gain. A weaker U.S. dollar helped increase oil's appeal. The November crude oil contract gained $4.21, or 5.3% to settle at $84.45 a barrel. The dollar weakened against a basket of currencies, with the dollar index down by 0.7%. Some 4.9 billion shares changed hands on the New York Stock Exchange and 2.1 billion traded on the Nasdaq. On the NYSE, 78% of shares gained ground while 20% declined. Bank of America (BAC), American Express (AXP) and JPMorgan Chase (JPM) were among the handful of Dow components to close in negative territory. U.S. economic indicators continued to fuel recessionary fears, although reports this morning did not appear to put a dent in the market's broad-based rally. The Conference Board's read on consumer confidence for September saw a slight increase to 45.4 from 45.2 in August. The reading slightly missed economist expectations for 46.6 in September. U.S. home prices rose for a fourth consecutive month in July. The Case-Shiller 20-city home price index rose 0.9% in July and 4.1% year-over-year, beating consensus expectations for a decline of 4.5%. Indications that the European Central Bank was open to the leverage plan helped the U.S. market soar on Monday. The Dow and S&P 500 bounced by about 2.5%. The correction was also fueled, in part, by short-covering and window dressing ahead of the quarter's end. Speculation that the ECB might cut the key interest rate soon has also helped investors take more risk.
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