Dow now is 12,810, up 74 points at midday.
The Associated Press
Signs that a widespread European debt crisis could be averted
helped send stocks up sharply Monday.
French banks agreed to accept slower repayment of Greece’s debt.
That would give Greece more time to meet its other immediate
financial obligations. French bondholders hold about $21.3 billion
in Greek government debt. Greek lawmakers are also debating
austerity measures that must pass before the country can receive
another financial rescue package to help avoid default.
The U.S. government, meanwhile, said that spending by consumers
decreased in May, after adjusting for inflation. April’s figures
were also revised downward, revealing the first decline since
January 2010. Consumer spending accounts for 70 percent of economic
activity.
Gas prices nearing $4 per gallon in late April and early May
curtailed spending on retail goods such as televisions and clothes.
Since early then, gas prices have fallen to about $3.57 per gallon.
Oil prices have declined steeply over the last few weeks, which
will translate into even lower pump prices. Lower gas prices could
help boost consumer spending in other areas in the coming
months.
Analysts said the rally was stronger than the economic news would
suggest in part because many traders invest when indices hit
certain pre-determined price levels.
In this case, the key number is 1,257 — the S&P’s break-even
figure for the year, said Todd Salamone, director of research at
Schaeffer’s Investment Research. The S&P approached that level
in March and again earlier this month. Both times, the market
rallied as so-called technical traders poured into the market.
The Monday-morning rally was driven by “a combination of trading on
that (break-even) level and a catalyst, the situation in Europe,”
Salamone said. “Whether we sustain it is another question.”
In early trading, the Dow Jones industrial average rose 111 points,
or 0.9 percent, to 12,046. The Standard & Poor’s 500 index rose 11,
or 0.9 percent, to 1,279. The Nasdaq composite index rose 32, or
1.2 percent, to 2,685.
All 10 industry groups in the S&P rose, with financials,
information technology and retail stocks showing the strongest
gains.
Shares of electronics maker Molex Inc. fell more than 4 percent,
the most in the S&P, after analysts with Ticonderoga Securities
downgraded the stock to “sell” from “neutral.” They said the slow
economy has hurt demand for tech gadgets such as the smart phones
that Molex manufactures.
After the market closes, athletic apparel maker Nike Inc. will
report on its financial performance in the fiscal fourth
quarter.
Broad markets have now fallen for seven of the past eight weeks as
traders received a string of dismal economic data showing that the
recovery is slowing. The Dow sank 1 percent on Friday, and the
S&P 1.2 percent, erasing last week’s gains for both indices.
The Nasdaq fell 1.3 percent on Friday.
The S&P and the Dow both are down 7 percent since they hit
their highs for the year on April 29. However, the Dow is still up
4 percent for the year, and the S&P is up 1.7 percent.
Europe’s debt problems have weighed on global markets in recent
weeks, with major indices reacting daily to the news about Greece’s
progress toward a second bailout. If Greece defaults, the fear is,
investors will lose faith in the financial strength of other
nations that have borrowed heavily or hold billions in Greek debt.
That could lead to the kind of credit crunch — when banks virtually
stopped lending to one another — similar to what sparked the
broader financial crisis after failure of investment bank Lehman
Bros.
