Stock Futures Advance After $170B Greek Rescue
NEW YORK (TheStreet) -- U.S. stock futures were climbing Tuesday as investors cheered a second bailout package for Greece but began focusing on the worrying economic state of the country and the debt risks other eurozone nations continue to face.
Futures for the Dow Jones Industrial Average were adding 32 points, or 34.1 points above fair value, at 12,961. Futures for the S&P 500 were up 2.4 points, or 3 points above fair value, at 1362. Futures for the Nasdaq were rising 2.3 points, or 0.4 points above fair value, at 2584.
Stocks closed mixed Friday as investors showed caution heading into the long holiday weekend with the fate of a second bailout for Greece still uncertain.
Over the extended President's Day weekend in the U.S., European finance ministers were scrambling to consolidate a debt rescue plan needed to prevent Greece from defaulting on more than €14 billion in bond redemptions due on March 20. Although the €130 billion ($173 billion) package was finalized after more than 13 hours of talks in Brussels, concerns remained about the support for the plan. The package requires that the majority of private sector investors of Greek debt accept more than a 53% write-down on the value of their holdings, which would cut down the country's debt by roughly €100 billion. The deal also relies on the amount of contributions that the International Monetary Fund is willing to provide.As part of the deal, Greece has to carry out steep budget cuts that would slash its debt to 121% of its gross domestic product by 2020, which could create more strain on an economy that's already in its fifth year of recession and facing the risk of social uprising ahead of its upcoming April elections. Debt right now is at 160% of GDP. The European Central Bank and national central banks will have to relinquish any income they may and will have earned on Greek bonds, which would reduce Greek debt by almost two percentage points by 2020. "Based on the action of global markets, it appears a bit of 'sell the news' is in order, but risk assets have experienced quite the rally over the last several weeks," said Dan Greenhaus, chief global strategist of BTIG. "More importantly though, we once again note that while some may be inclined to cheer this agreement, a debt level equivalent to 120% of your GDP is anything but something to be cheered." Germany's DAX was falling 0.4% while London's FTSE was down 0.8%. Japan's Nikkei Average closed lower by 0.23% and Hong Kong's Hang Seng closed up 0.25%.
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