Dow jumps 287 on hopes for Europe fix

Stocks stage their biggest 1-day rally of the year. Investors bet on lower rates in Europe and maybe more Fed action. The Fed's Beige Book says the economy may be better than thought.

By Charley Blaine Jun 6, 2012 11:51AM
Charley BlaineUpdated: 9 p.m. ET

Stocks soared to their biggest gains of the year today after the European Central Bank hinted it may cut its key interest rate in the next few months and reports suggested the Federal Reserve may engage in more easing to boost the domestic economy.

The Dow Jones industrials ($INDU) finished up more than 280 points. The blue chips have also moved back into the black for 2012. The Standard & Poor's 500 Index ($INX) also enjoyed its biggest gain of the year. The Nasdaq Composite Index ($COMPX) was higher for the third straight day. 

At the same time, the Federal Reserve's Beige Book, released this afternoon, painted a a more optimistic view of the economy than last week's jobs report, with regional economies seeing solid auto and retail sales and even some strength in housing. Throughout the report, growth is described as moderate or modest. There were concerns that a slowdown in Europe and domestic political uncertainty may affect future business conditions.

The rally pushed up interest rates as money was pulled away from bonds and as the dollar moved lower against the euro and British pound. Crude oil (-CL) in New York settled up 73 cents to $85.02 a barrel. Brent, the benchmark North Sea crude, was at $100.86 a barrel, up $2.012. Gold (-GC) settled up $17.30 to $1,634.20 an ounce.

The Dow finished up 287 points to 12,415, its second gain in a row. Not only is the gain the Dow's biggest of the year, it's the largest since Dec. 22 when the blue chips jumped 337 points. The S&P 500 gained 30 points to 1,315. It was the first time the index has been above 1,300 since Friday's ugly sell-off. The Nasdaq jumped 67 points to 2,845, coming up just short of achieving its largest gain of the year.

Article continues below.
The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was up 59 points to 2,546, its second-best day of the year after a 67-point gain on May 21. Apple (AAPL), which is the biggest influence on the index, was up $8.63 to $571.46, adding 7.2 points to the index by itself.

Gains for Microsoft (MSFT), Oracle (ORCL), Google (GOOG), Intel (INTC) and Cisco Systems (CSCO) contributed an additional 18 points to the index's gain. (Microsoft is the publisher of MSN Money.)

A broad rally but light volume
The rally was broad, with all 30 Dow stocks showing gains, along with 97 Nasdaq-100 stocks and 487 S&P 500 stocks. Energy, financial and materials stocks were the strongest sectors of the S&P 500; all 10 sectors were higher overall.

Volume was light, however. New York Stock Exchange volume was just 862 million shares.

The result of today's rally is this: The Dow finished the day up 1.6% for the year after seeing all its 2012 gains disappear by Friday. The S&P 500 is up 4.6%, and the Nasdaq is up 9.2%.

The pain since the market started to peak at the end of March is still real. The Dow remains 6.5% below its May 1 closing high, while the S&P 500 is off 7.5% from its peak on April 2, while the Nasdaq is off 8.9%.

Most of the losses have come as investors have worried that Europe's financial system was in grave danger and as evidence suggested that the U.S. recovery was losing steam.

While the hints from Europe and the Fed were probably the biggest factors pushing the rally, there were some who thought Gov. Scott Walker's win in the Wisconsin recall election also played a role.

Thursday's market faces the weekly report on jobless claims and Fed Chairman Ben Bernanke's testimony before the Joint Economic Committee.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$85.02

$84.29

-1.75%

-13.97%
(per barrel)











Heating oil (-HO)

$2.6717

$2.6336

-1.17%

-8.32%
(per gallon)











Natural gas (-NG)

$2.4210

$2.4460

-0.04%

-19.00%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6903

$2.6847

-1.19%

1.24%
(per gallon)











Brent crude 

$100.64

$98.84

-1.21%

-6.28%
(per barrel)











Retail gasoline

$3.5650

$3.5700

-1.52%

8.82%
(per gallon; AAA)













Disk-drive makers, builders lead the market
Homebuilding stocks were among the biggest winners after luxury builder Hovnanian (HOV) said it sold more houses in April than in any month since the spring of 2006 and turned a profit in the fiscal second quarter when Wall Street was expecting a loss. Hovnanian shares were up 31 cents to $2.01.

The Philadelphia Housing Sector Index ($HGX) was up 4.01 to 120.11 and remains up 16.7% for the year.

Home Depot (HD) was up $1.68 to $50.60 after it reaffirmed fiscal earnings guidance at its annual analyst meeting.

Disk-drive makers were the strongest group, with the NYSE Arca Disk Drive Index ($DDX) up 3.95 to 101.40. Seagate Technology (STX) rose $1.07 to $23.67.

Energy and financial stocks were the leading sectors of the S&P 500; all were up at least 1% on the day.

Bank of America (BAC), United Technologies (UTX) and Caterpillar (CAT) were the top Dow percentage gainers.

More than 124 points of the Dow's gain came from five stocks: IBM (IBM), Chevron (CVX),  Caterpillar, United Technologies and Exxon Mobil (XOM). All derive large shares of their revenue from Europe.

Morgan Stanley (MS), up $1.08 to $13.94, and Bank of America, up 54 cents to $7.64, were the second- and third-best S&P 500 performer behind information-storage company Iron Mountain (IRM), up $3.92 to $32.32.

Facebook (FB) was up 94 cents to $26.81. One reason for the gain was an upgrade from analyst Mark Harding of JMP Securities. He thinks the huge user base offers huge opportunities for profits.

But the stock is still off 29% from $38, where its initial public offering was priced.

At the same time, the Nasdaq OMX Group (NDAQ) proposed a "one-time" payout of around $40 million to compensate some financial firms that lost money after the exchange operator botched their trades during Facebook's initial public offering. Shares rose 38 cents to $22.24.

ECB hints at a rate cut

What's not clear is if the gains for the market since Friday are a relief rally or something more powerful. By many measures, the downdraft that began in April had pushed stocks down so far that a rebound was inevitable.

The immediate catalyst for today's rally came from the European Central Bank, which held its base rate at 1%. That was expected, but ECB President Mario Draghi conceded that several members of his board wanted to cut rates now. Moreover, Draghi said European growth was weakening in the second quarter and there were "downside risks" to the eurozone's economic growth.

Many analysts took that as a signal the ECB may well cut rates. IHS Global Insight economist Howard Archer predicted the rate will be cut to 0.75% in July.

The ECB and Europe are facing serious disruptions. Greece's government said it could run out of cash by July because of declining tax revenues caused by the country's depression and widespread tax evasion.

Spain's banks are facing collapse as depositors move their money to banks elsewhere in Europe. The big fear is a full-fledged bank run, in part because Spain doesn't have a strong system of deposit insurance.

Meanwhile, the Federal Reserve was at least thinking about a possible move to stimulate the U.S. economy, The Wall Street Journal said. But the critical question was if the economy has deteriorated enough to warrant a move. There are deep divisions, especially among presidents of the 12 regional Federal Reserve banks, on whether something is needed now.

No matter. Just the thought that the Fed might be thinking about more quantitative easing was enough to cheer Wall Street.

While the Beige Book said hiring was "steady," a Labor Department report last week showed that employers added 69,000 workers to payrolls in May, less than half the median estimate in a Bloomberg survey of economists and down from 275,000 in January.

"We’re getting a lot of conflicting information here, and that usually means reality is somewhere in the middle," Diane Swonk, chief economist for Mesirow Financial in Chicago, told Bloomberg Radio.

Today’s Beige Book reflects information collected on or before May 25 and summarized by the Dallas Fed.

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0800%

0.070%

14.29%

700.00%
5-year Treasury note 

0.726%

0.670%

8.20%

-12.53%
10-year Treasury note

1.651%

1.556%

4.43%

-11.76%
30-year Treasury bond

2.720%

2.619%

1.80%

-5.85%
Currencies











U.S. Dollar Index

82.379

82.913

-0.90%

2.31%
British pound

1.5499

1.5382

0.56%

-0.25%
(in U.S. $)

 








U.S. $ in pounds

£0.645

£0.650

-0.55%

0.25%
Euro in dollars

$1.26

$1.25

1.75%

-2.93%
(in U.S. $)

 








U.S. $ in euros

€ 0.795

€ 0.803

-1.72%

3.02%
U.S. $ in yen 

79.43

78.76

1.11%

3.02%
U.S. $ in Chinese

6.39

6.36

0.07%

0.95%
yuan











Canada dollar

$0.973

$0.964

0.51%

-0.78%
(in U.S. $)

 








U.S. dollar 

$1.028

$1.038

-0.51%

0.78%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,634.20

$1,616.90

4.48%

4.30%
(per troy ounce)

 








Copper (-HG)

$3.379

$3.289

0.40%

-1.66%
(per pound)

 








Silver (-SI)

$29.4880

$28.4050

6.24%

5.63%
(per troy ounce)

 








Wheat (-ZW)

$6.2425

$6.1325

-3.03%

-4.37%
(per bushel)

 








Corn (-ZC)

$5.8625

$5.675

5.58%

-9.32%
(per bushel)

 








Cotton 

$0.6745

0.6536

-6.12%

-26.43%
(per pound)

 








Coffee

$1.5800

1.5845

-3.04%

-31.20%
(per pound)

 








Crude oil (-CL)

$85.02

$84.29

-1.75%

-13.97%
(per barrel)










 

293Comments
Jun 6, 2012 12:46PM
avatar

So in a matter of 24 hours or so the Dow "leaps" on "hopes" for Eurozone fix. 

 

That would be like me saying my financial empire will "leap" on the "hopes" of  winning the Lottery.  We all know it is probably easier to get struck by lightning than fixing the Eurozone or me winning the lottery.

 

Wall Street is full of Sh!t.

Jun 6, 2012 1:43PM
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Hope?   Sounds like getting in line for another haircut....

Does Debasing and printing new Euro's to pay bad debts solve the problem?  Or does it just kick the can down the road and at the same time destroy the Euro denominated savings of the German Middle Class?

Did any of these countries balance their budgets?  Did they stop trying to find lenders so they can continue their socialist states entitlements?  What happens when no one will lend them any more money, and no one will print them up a fresh batch?

Seems strange to me that the market would cheer on the debasement of the Euro...  If I held Euro's or Euro denominated assets, I would unload them.  Dollars, Swiss Francs or gold look far safer...
Jun 6, 2012 12:46PM
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WHOO-HOO! Everything is "fixed"; no more worries about ANYTHING!!!! Happy days are here again!!!
Jun 6, 2012 12:46PM
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Lowering rates in Europe and Easing(printing money) in the US. This just delays the inevitable. Do the right thing on the Fiscal side. Take the short term pain for the long term gain!!
Jun 6, 2012 1:28PM
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GA Jono,

 

The biggest impediment to job creation in the U.S. is the continuing outsourcing of jobs, not unions. While I agree that some public sector pensions got way out of line and need correcting, the biggest problem remains, as always outsourcing. Workers in China make about .75- $1.00 an hour, with no benefits at all. As a small business owner I can tell you the #1 expense in any business is labor. Simply put we cannot compete with slave labor, unless you and the American public want to work for those types of wages you should pressure your elected officials to tariff all these imports to bring jobs back to America. The I phone costs about $1,000 to produce in China, if it was made in America the cost would be about 10% more. Apple created 720,000 jobs, 700,000 of those in China, I would gladly pay 10% more for the phone to be made in America. Remember everyday low prices equal everyday low quality and wages, something to think about eh?

Jun 6, 2012 3:47PM
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Let us take a little test.  Anybody remember Clintion signing NAFTA?  Remember Perot saying the jobs would leave America.  What don't people do when they aren't working?  They don't spend and they don't pay taxes.  So the Feds enacted NAFTA and free trade and the states lost Billions and Billions of tax revenue and Jobs and now the have come up short.  So the wanna bees say hey look the unions are bad and we can't afford the wages and benefits we already agreed to pay them.  So please folks why are the states not demanding changes in import laws so we get our jobs, incomes, and tax bases back?  Screwing the Unions is only a short term feel good activity. Who gained the most since NAFTA and free trade?  Business and stockholders. And who do they have you Blaming?  And who is paying all the freight?  The little working Folks.  
Jun 6, 2012 1:39PM
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This market being up today is all bullsh*t and is nothing more than being manipulated by those in control.  Today's upswing is based on "Hope" and is just an excuse for those in control to justify the market reaction.  Wall St is nothing more than legalized gambling by those in control using other people's money.  It is time to revamp Wall St. and eliminate the corruption. 
Jun 6, 2012 4:31PM
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LOL, my crystal ball sees a 160 point drop in the Dow tomorrow, and then another 80 drop on Friday.  If this supposed "fix" means throwing more debt at deadbeat nations... isn't this the problem, not the solution!  Stop the insanity...
Jun 6, 2012 3:55PM
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Yeah, that's what we need, more "easing", I mean dilution of the value of the dollar.  Want to fix the economy for good?  The government should live within its' means and start paying back some of the 15+ trillion of dollars it has stolen from future generations.  If government spending was the solution I would think 15+ trillion dollars should have been enough.

Now let's see how many of the retarded Keynesian puppets give this the thumbs down...
Jun 6, 2012 1:21PM
avatar

What they hope for to might  happen has not addressed the main issue here, Paying down your debt. Instead, they're putting their hope  on more cheep money. That would be fine if they could LEND IT OUT to make some sort of profit. But sadly no, It's being 'shoveled'  around just to try and service the debt they already have (or actually increase it).

 

We should be paying close attention to paying our own debt down here and have the wisdom to make the hard choices now in order to insure a prosperous future.

 

Congrats to Gov. Walker of Wisconsin. He actually delivered what he said he would do, stuck to his 'guns' and within a couple of years, you're going to see a historic turn around in that states finances.

avatar
Why do you keep writing these **** headlines (
"Dow looks at 200-point gain on European hopes"
) to try and prop up the market?  What exact 'hopes' are you referring to?  Do you have a conscience?  The Euro is about to get hammered, your misleading copy notwithstanding.  Stop the idiotic propaganda designed to sucker in ill-informed investors.
Jun 6, 2012 4:55PM
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Don't worry the news will be different tomorrow - probably the exact opposite and contradicting todays news.
Jun 6, 2012 5:02PM
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Only in the worst performing stock market of the past 30-years has the word "soaring" been so abused and over-used to describe baseless claims and outright lies. Soaring and the hopey thing used over and over and over again. Why, just the day before the market had given back all the gains of a year. Something is wrong here. Very, very wrong.
Jun 6, 2012 2:01PM
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Screw the stock market..I have a few old blue chip utility stocks left there but pulled all my investments years ago..The markets are fixed and only the very wealthy have access to the real moneymakers there. Im investing in cheap real estate right now but Im lucky cause I have the credit and cash to do it but other investors are SOL..This country is teetering and Im seriously thinking of moving somewhere else in the next 5 years if things keep headed the wrong way
Jun 6, 2012 4:29PM
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Walker didn't damage unions. They talk about losing collective bargaining RIGHTS. They didn't bargain, they wanted pay raises, less work, better benefits or else. Doesn't sound like bargaining to me. They now pay into their own pensions and part of their own healthcare. They can also opt out of union run healthcare insurance saving cities a lot of money. Most of the rest of us that work have been doing this copay stuff for years. We're just happy to have jobs.
Jun 6, 2012 5:30PM
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I take all this news with a grain of salt. Tomorrow's headline will be Market drops on fears in Europe again. What else is new? Once they get their act together which will take another year or so, then it will the rest of the world turning their attention to the U.S. as our dept is out of control and we have no one in Washington that has the political will, (code for balls), to fix this problem.
Jun 6, 2012 4:19PM
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This comment thread is a perfect case study of why nothing positive gets done. So many people,  massively ignorant of basic economics, venting their biases against the left and right while blind to the underlying fact that the same basic political ideology has been in power for the last  four decades. If you honestly want to see any change from the status quo that put us where we are today its time to consider voting for someone else. If you really think anything fundamental changes when the R's hand their seats the the D's or vis versa you haven't been paying very close attention for very long.
Jun 6, 2012 1:48PM
avatar
Ah, yes, the U.S. stock markets, if anything, a measure of how well U.S. based companies are doing in their foreign endeavors; there aren't enough  U.S. manufacturers left in the U.S. to have a meaningful effect on the markets.
Jun 6, 2012 1:45PM
avatar

Quite a jump, and immediately after a 'minor' conservative victory in a one-state recall election.

Just imagine what could happen if the U.S. Senate, House of Representatives, and White House go to conservatives in November.

Jun 6, 2012 5:08PM
avatar
What a coincidence - the day after WI voters showed they have common sense.  Please give us a Walker in Minn to replace the current bedwetting nitwit.
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