Stocks Snap Losing Streak in Style

NEW YORK (TheStreet) - The major U.S. stock indices all gained more than 1% Monday, rebounding from their worst weekly performance of 2012, as international leaders took steps to calm fears about the future of the euro.

Wall Street saw its best session since the beginning of May on a welcome dose of M&A activity with Eaton Corp. ( ETN) agreeing to buy Cooper Industries ( CBE) for $11.8 billion in cash and stock. Shares of Cooper Industries soared 25%.

News that the Chinese government plans to undertake measures to boost the world's second largest economy also helped market sentiment.

A glaring negative was the heavy selling pressure on Facebook ( FB), which made a shaky public debut on Friday. Shares of the social networking giant dived on Monday though, breaking well below their offering price of $38 each and losing roughly 11% to close at $34.03..

The Dow Jones Industrial Average rose 135 points, 1.1%, to close on a high note at 12,504. The blue-chip index had lost ground in six straight sessions, and 12 of the past 13 trading days.

The S&P 500 jumped 21 points, or 1.6%, to close at 1316, moving off a fourth-month low. The Nasdaq surged 68 points, or nearly 2.5%, to close at 2847. Apple ( AAPL) surged nearly 6%.

Breadth within the Dow was positive with 23 of the index's 30 components finishing higher. The biggest percentage gainers were Boeing ( BA), Caterpillar ( CAT), Hewlett Packard ( HPQ), Alcoa ( AA), and duPont ( DD).

JPMorgan Chase ( JPM) and Bank of America ( BAC) were the biggest drags on the Dow.

JPMorgan shares fell nearly 3% after CEO Jamie Dimon said the bank has suspended its $15 billion share buyback program in the wake of its recently disclosed $2 billion trading loss.

In the broader market, the number of winners outpaced losers by a more than 6-to-1 ratio on the New York Stock Exchange and more than 3-to-1 on the Nasdaq.

From a sector standpoint, capital goods, technology, basic materials and conglomerates were leading the gains, with the majority of the S&P 500's large-cap sectors in positive territory.

Chinese premier Wen Jiabao said over the weekend that he wants to see more measures taken to stimulate economic growth in China.

"What happens in China has a disproportionate effect on what happens elsewhere," said Telly Zachariades, partner at Valence.

Without providing details of the measures he had in mind, Wen said "the relationship between maintaining growth, adjusting economic structures and managing inflation, must be properly handled," according to the Xinhua News Agency. "We should continue to implement a proactive fiscal policy and a prudent monetary policy while giving more priority to maintaining growth."

China last week carried out some small measures, with expectations of more down the line, to stimulate domestic consumption following a handful of lackluster economic data including weak retail sales and tepid import growth. The steps included subsidies for the buying of energy efficient goods in the form of, for example, washing machines, light bulbs, and green cars.

"At this junction, a bigger priority means the biggest priority, which is a clear signal of more policy easing to come," noted economists at Societe Generale of Wen's remarks.

"The news from China today is positive but I think that market is going to be in a little bit of a 'show me' state," said Richard Weeks, managing director and partner at HighTower's VWG Wealth Management.

The Hang Seng Index in Hong Kong finished 0.2% lower and Japan's Nikkei average closed up 0.3%.

Over the weekend in Camp David, Md., G8 summit leaders expressed to German Chancellor Angela Merkel their desire to see more effort put into bolstering eurozone economic growth, though their urging didn't result in any firm commitments.

The leaders from the world's top economies said in a statement that their goal is to "promote growth and jobs." This was a departure away from a prior view in favor of eurozone-wide austerity measures targeting burgeoning budget deficits.

"The right measures are not the same for each of us," they added.

Towards the end of the summit, President Barack Obama added, "We agreed upon the importance of a strong and cohesive eurozone and affirmed our interest in Greece staying in the eurozone while respecting its commitments."

Merkel, French President Francois Hollande and Obama together signed a statement at the summit outlining steps to promote growth alongside austerity measures to combat the eurozone debt crisis, but how to accomplish this has been a subject of much disagreement in Europe.

On Wednesday, European Union leaders plan to meet in Brussels to try to reach a compromise on this matter. While Hollande urged the acceptance of debt supported by the more powerful eurozone countries like Germany to fund growth in the weaker ones, such as Greece, Germany continues to argue against eurobonds. Germany said that with eurobonds such debt-laden countries would lose their motivation to clean up their fiscal problems while jeopardizing borrowing costs in the stronger countries.

London's FTSE closed up 0.7%, and the DAX in Germany finished up 1%.

Meantime, JMP Securities analyst David Trone downgraded the five major U.S. banks, mainly because concerns about contagion risks in Europe if Greece does ultimately leave the eurozone. Trone also cited headwinds from the upcoming expiration of Bush-era tax cuts and U.S. deficit issues ahead of the impending presidential elections.

The call involved Bank of America, Citigroup ( C), Goldman Sachs ( GS), JPMorgan, and Morgan Stanley ( MS).

The U.S. economic calendar was clear.

The benchmark 10-year Treasury was falling 7/32, lifting the yield to 1.748%. The greenback was down 0.18%, according to the dollar index.

The July crude oil contract rose $1.06 to settle at $92.86 a barrel. June gold futures slipped $2.80 to settle at $1,591.30 an ounce.

In corporate news, Barclays ( BCS) plans to sell its $6.1 billion stake in BlackRock ( BLK). Barclays holds a 19.6% stake in the asset-management company. Shares of Barclays rose 3.8%, while BlackRock's stock lost 2.4%.

Over the weekend, Yahoo! ( YHOO) reached a deal to sell up to half of its stake in Alibaba back to the Chinese e-commerce company for about $7.1 billion. Yahoo! shares gained 1% on the news.

Shares of Lowe's ( LOW) plunged 10% after the home improvement products retailer lowered the range of its earnings outlook for fiscal 2012.

The largest operator of kidney dialysis centers in the U.S., DaVita ( DVA), said Monday that it has agreed to buy HealthCare Partners, which operates medical groups several states in the U.S., for $4.4 billion. DaVita's stock rose nearly 5%.

Shares of Chesapeake ( CHK) increased by about 4% after the company said it will cut the pay of outside directors by 20% and eliminate the use of company aircraft as it takes further steps to address criticism of its leadership and oversight of pay practices.

-- Written by Andrea Tse and Shanthi Bharatwaj in New York.

>To contact the writer of this article, click here: Andrea Tse.

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