By Kate Gibson
U.S. stocks made their biggest one-day gain in 13 months Monday,
re-establishing gains for the year, after an agreement on a nearly
$1 trillion rescue plan to stabilize Europe lured investors back to
a badly shaken market.
After last week's wipeout of gains made in 2010, the Dow Jones
Industrial Average (DJI) closed up 404.71 points, or 3.9%, to
10,785.14, its biggest daily gain since March 2009, and enough to
bring it safely back into positive territory for the year.
"Shorts are caught in a big way today after Friday's poor action
and thinking that the EU would be too slow to react. It's not a new
ball game today, but it is a new inning," said Elliot Spar, market
strategist at Stifel, Nicolaus & Co.
So-called short investors bet that a stock price will fall.
The European Union and the International Monetary Fund, shaken
into action as the euro skidded to a 14-month low, late Sunday
agreed to commit nearly $1 trillion toward a bailout fund to back
European nations hit by debt woes. Aiming to stem any contagion
arising from debt-ridden Greece was the catalyst for the Europeans'
action.
Also, the Fed reopened a program that funnels dollars overseas
through foreign central banks, which can then lend the currency to
banks in their countries.
All of the Dow's 30 components climbed. Caterpillar Inc. (CAT)
shares rallied 7.4%, leading the index of established companies,
followed by 6.9% gains in shares of Bank of America Corp. (BAC) and
General Electric Co. (GE).
Also bolstering the blue chips, Boeing Co. (BA) rose 6.4% after
Goldman Sachs hiked its rating on the commercial
aircraft-manufacturer to conviction buy from neutral.
Shares of discount giant Wal-Mart Stores Inc. (WMT) lagged the
broader index, up just 0.3%.
The S&P 500 Index (SPX) closed up 48.85 points, or 4.4%, to
1,159.73, with all 10 of its industry groups rising.
Industrials and financials, two of the hardest hit by investor
jitters over Europe's potential debt crisis, led the gains on the
S&P 500.
Aflac Inc. (AFL) shares rallied 12%. Shares of the insurer fell
sharply last week after the company said it held nearly $2 billion
in bonds tied to financial institutions in Greece and Portugal.
Genworth Financial Inc.'s (GNW) shares gained nearly 13%, while
Marshall & Ilsley Corp. (MI@) shares rallied 12%.
"While the volatility of last week has reawakened memories of
the awful fourth quarter of 2008, it also appears to have spurred
European policy makers into decisive and united action," said David
Kelly, chief market strategist at J.P. Morgan Funds.
The Nasdaq Composite Index (RIXF) gained 109.03 points, or
4.81%, to 2,374.67 as the index's tech stocks, hit hard during last
week's rout, came roaring back.
Apple Inc. (AAPL) shares closed up 7.7%. Hewlett-Packard Co.
(HPQ) shares added 5.1%. Google Inc. (GOOG) gained 5.8%.
For every stock on the decline, about 18 rose on the New York
Stock Exchange, where nearly 1.9 billion shares traded. Composite
volume exceeded 7.2 billion.
Among the few notable decliners, Dean Foods Co. (DF) shares fell
28% after the diary goliath reported a sharply lower first-quarter
profit and a lackluster earnings outlook. .
Europe unified
Markets also rocketed higher in Europe, where shares surged more
than 6%, in their best single-day performance since late 2008.
.
"At long last, the European Union is putting its money where its
mouth is," said Jack Ablin, chief investment officer at Harris
Private Bank. "At the very least this buys them a lot of time. I
don't think Greece is going to have to come back to the bond market
anytime soon."
The European aid package includes new loan facilities. And the
European Central Bank said it will buy bonds in the secondary
market to ensure liquidity for "dysfunctional" market segments.
During the U.S. trading session, the euro moderated its advance
against the U.S. dollar (CUR_EURUSD), trading $1.2781 after
crossing above the $1.30 level.
"The 'save the euro' campaign announced yesterday worked for
just a few hours as the euro is moving back to unchanged," noted
Peter Boockvar, equity strategist at Miller Tabak.
"As long as the European Central Bank is in the new game of
printing money and buying sovereign debt, the euro will remain
under pressure," he said.
Treasury prices fell sharply, pulling yields on the benchmark
10-year note (UST10Y) up 11 basis points at 3.54% -- their worst
day since December.
Gold futures fell after three days of gains, dropping $9.60 to
end at $1,200.80 an ounce, while oil prices climbed $1.69 to $76.80
a barrel.
Markets around the world had plunged last week as worries
mounted that Greece's debt troubles would spread across Europe and
derail the global recovery.
The Dow declined 5.7% last week. The manic period reached its
most crazed point on Thursday when the Dow fell nearly 1,000 points
before recovering more than half of the loss before the final
bell.