Stocks Close Mixed on Greece Bailout Questions
NEW YORK (TheStreet) -- Stocks posted a mixed close Tuesday as the Dow pulled off the 13,000 mark and the market gave Greece's second bailout package a tepid reception.
The Dow Jones Industrial Average added 16.2 points, or 0.1%, at 12,966, after breaching the psychologically significant level of 13,000 for the first time since May 2008. Twenty two of the 30 blue-chip components rose, with Alcoa (AA), Kraft (KFT) and Caterpillar (CAT) leading gains. Wal-Mart (WMT), Travelers (TRV) and Merck (MRK) were the biggest laggards.
"The escalation of commitments is enough to create momentum in equities," says Michael Gayed, chief investment strategist at Pension Partners, who notes that the markets have been sensing a "dramatic shift" to the return of inflation expectations -- paving the way for conditions conducive to a stock rally."The poor [treasury inflation-protected securities] auction of last week was indicative of the idea that investors now may see stocks as the inflation hedge." "There's a direct connection between volatility and deflation scares," he said. But, "none of this happening [today]." Over the extended President's Day weekend in the U.S., European finance ministers scrambled 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. If the implementation of the deal goes according to plan, Greece will cut debt to 121% of its gross domestic product by 2020, which may strain an economy already in its fifth year of recession. "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 settled down 0.58% while London's FTSE closed lower by 0.29%. Japan's Nikkei Average closed lower by 0.23% and Hong Kong's Hang Seng closed up 0.25%.
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