Stocks soar on European debt deal

Global markets surge and the Dow crests 12,000 after policymakers agree to boost the eurozone's rescue fund. GDP rises in the third quarter. Jobless claims dip marginally. Procter & Gamble meets expectations. Oil prices rise.

By TheStreet Staff Oct 27, 2011 7:34AM

TheStreetImage: Wall Street sign (© Corbis/SuperStock)By Melinda Peer, TheStreet

 

Updated at 12:38 p.m. ET

 

Stocks surged 2% and the Dow Jones Industrial Average ($INDU) traded above the 12,000 mark Thursday on news that European leaders agreed on key details of a strategy to  address the eurozone debt crisis during a Wednesday summit.

 

All major U.S. indices moved into positive territory for the year. The Dow Jones Industrial Average ($INDU) was up 306.5 points, or 2.5% at 12,175. The S&P 500 ($INX) was gaining 36.1 points, or 2.9%, at 1,278 and the Nasdaq ($COMPX) was ahead by 75.3 points, or 2.8%, at 2,725.

 

Negotiations from Wednesday’s summit of European leaders in Brussels dragged overnight, but news of a strategy agreement had global markets heaving a huge sigh of relief on Thursday. French President Nicolas Sarkozy said the European Financial Stability Facility will be leveraged by four to five times to provide guarantees on bonds of struggling eurozone member countries. Additionally, private banks agreed to take a 50% reduction on Greek debt held by private investors.

 

In Europe, London's FTSE rose 2.8%, and Germany's DAX soared 5.3%. Overnight, Asian markets surged on the news. Japan's Nikkei Average gained 2%, and Hong Kong's Hang Seng jumped 3.3%.

 

The dollar index, a measure of the dollar's value against a basket of currencies, was declining 1.52%, and the euro was falling 1.7% against the greenback.

 

Materials and financials were seeing some of the strongest gains of the sector with Alcoa (AA), Bank of America (BAC), JPMorgan Chase (JPM) and DuPont (DD) topping the Dow.

 

Post continues below.

On the economic front, the economy grew 2.5%, as expected, in the third quarter, according to an initial reading on gross domestic product. That compares with growth of 1.3% in the second quarter.

Meanwhile, the latest labor data showed the unemployment picture was little changed with initial jobless claims falling by 2,000 to 402,000 in the week ended Oct. 22.

 

The National Association of Realtors said pending-home sales fell 4.6% in September from the prior month, disappointing  expectations for a flat reading.

The benchmark 10-year Treasury was down 29/32, lifting the yield to 2.315%.

 

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In Thursday’s earnings news, Dow component Exxon Mobil (XOM) topped Wall Street’s profit expectations by a penny with third-quarter earnings of $2.13 a share. Shares were advancing 0.2% to $81.28.

 

Fellow Dow component Procter & Gamble (PG) met analysts’ estimates with fiscal first-quarter earnings of $1.03 a share and said sales rose 9% to $21.92 billion, topping expectations for revenue of $21.53 billion. The stock was shedding 0.02% at $64.94.

 

All 30 Dow components were trading in positive territory but Exxon Mobil and Procter & Gamble were holding the mildest gains.

 

Shares of Royal Dutch Shell (RDS.A) were rising 1.1% to $73.21 after the oil company said third-quarter profit doubled on higher oil prices.

 

Aetna (AET) stock was jumping 3.7% to $40.35 after the health insurer surpassed analysts' estimates with third-quarter operating earnings of $1.14 a share on lower-than-expected usage. Wall Street had projected a profit of $1.15 a share.

 

In other news, Sony (SNE) will acquire Ericsson’s (ERIC) 50% stake in their Sony Ericsson mobile phone venture, making the mobile handset business a subsidiary of Sony. Sony acquired the stake for 1.05 billion euros, or $1.47 billion in cash. Shares of Sony were rising 5.8% to $21.82.

 

In commodity markets, gold for December delivery was adding $21.30 at $1,744.80 an ounce, while the December crude oil contract was trading $3.29 higher at $93.49 a barrel.

215Comments
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Great news...European bankers have managed to put together a deal to keep their countries afloat for a spell...this means that us here in Maine can obviously afford higher gas and oil prices that seem to be the immediate result of any deal made...here or elsewhere...Wall Street  and oil speculators are running this country into the ground...soaring oil prices mean folks here in Maine will just have to cut back on all spending beyond heating their homes...like recent years past...but after all who really needs groceries...medicati​on..to pay their mortgage...ect? This speculator induced madness has got to end...
Oct 27, 2011 12:31PM
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Kids, if you are thinking about going to college for Business/Economics save your money & pick another major.  Basic Economics 101 teaches about  "Supply & Demand" meaning the more you have of something the less it should cost.  A perfect example in today's economy is Oil prices.  We have plenty of Oil available, driving consumption is down due to less people working, most people are consolidating trips to save gas and yet Oil prices keep rising which defies the Basic Economics 101 teachings.  Maybe if you are thinking about a Business career you should take the courses labeled "Wall Street 101...how to screw America & get away with it".
Oct 27, 2011 8:06AM
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Spain, Italy, and Portugal will demand the same favorable treatment as Greece, then what?

 

Were it not for Germany the Euro would have minimal value.  The EU future is bleak as these countries were never on the same page economically. 

 

The IMF receives the majority of their funding courtesy of the American taxpayer.  Where do we come up with the cash to continue this theft?

 

As usual the devil is in the details, and the details always put the screws to the American taxpayer.

Oct 27, 2011 8:14AM
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Everyone wants a great economy, myself included. But big oil wants it worst than anyone because we are paying astronomical amounts for gas now. Any boost in the economy and we will be begging for $5.00 a gallon gas, and the goverment will sit around doing nothing about it with their thumbs up their a$$es getting filthy rich!!
Oct 27, 2011 10:18AM
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Please please explain what Europe fixed!!!!  I have read about it.  They got 1 trillion Euros.  First off that sounds like a made up number that clearly shows they have no clue what it takes to fix the economy.  It sounds like they ask Austin Powers for a figure to solve the problem.  
Secondly we bailed out our banks and everything else except the middle class and our economy still sucks.  So what did Europe fix?  Kicked the can down the road?  More leverage a good thing?  Please someone just give me a little detail on how anything is better.
Oct 27, 2011 10:19AM
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What a bunch of crapola.  Greece's deal is going to allow them to 'write-down' 50% of their debt, that's a good deal, to me that's called insolvency, and it's coming to America if we don't stop spending money we don't have.  Stock market rise my ****, what happens is that the US dollar gets devalued, crude oil goes up and so does everything thing in my life, food, gas, clothing, etc.

 

To hell with the stock market and the fat cats making deals that won't be investigated until it's too late, recall 2008, no one went to prison, but we got stuck bailing those bastards out, it's going to happen again and soon with this kind of reasoning.

Oct 27, 2011 10:15AM
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Wall Street, your Greed never ceases to amaze me. You raise oil prices everyday when our current economy cannot support them. There are no basic fundamentals to support these current prices. We are using less and driving less and we are gaining on inventories, but that does not matter to you. You are not satisfied to make a descent profit, you want to make a "Killing", but the only thing that you are killing is the average consumer with high prices. It is getting harder and harder for the poor and working people in this country to get by and support their families. Maybe it is time that you pulled your head out of Europe's **** and paid attention to what is happening on main street in your own country. If you keep raising prices, we the consumer will once again fight back by the only way we can and that is by cutting back on spending once again. If you had any brains, you would realize this. You might gain in the short scheme of things, but I guarantee you when we cut back on spending and there is no economic growth, your big market will not like it.
Oct 27, 2011 8:07AM
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What is today, Thursday. O yea, the market always goes up between 100 to maybe 150 point on a Thursday. Tomorrow will be flat, maybe on the down side. By this coming Monday if the Insiders of Wall Street start putting their money in Short Trades the market will fall immediately. For us the average investor and for us to play follow the leader is a useless gamble. Just get your money out of the stock market. You will lose regardless of what the stock market is doing.
Oct 27, 2011 12:20PM
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Someone please explain to me how Exxon/Mobil  can post a 41% profit and just today the price of oil went up over $3 per barrel? I'm not a Harvard graduate, but this appears to be just a tad bit out of focus for the average citizen.
Oct 27, 2011 8:25AM
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Yipee, my stocks are up 10%, and oil and gas is only up ......... 20%.

 

Oh, I see. 

Oct 27, 2011 11:44AM
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So the Greeks are willing to pay half of what they owe private investors. I grew up in a neighborhood with many Greek immigrants and they were a very proud group of people. You could always trust them to keep their word. What has happened to this world when it is acceptable for individuals and entire countries to default on their debts not due to war or natural disaster but due to their own inability to control their spending. Where is their pride? 

Oct 27, 2011 12:09PM
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quoted text: It is inevitable that we are going to have to increase taxes on everyone. But I don't want to pay 1 cent more in taxes until our leaders can prove to me that they can eliminate waste, pork, and use tax revenues wisely.


ROFLMAO and which planet are you from Disgusted.

Wishful thinking at its' best.

 

I agree - it's just how I feel.  And I believe there's a whole lot of Americans out there just like me that feel the same way.

 

We need to elect more people to government that feel the same way.  Oh, I kinda think that's how the Tea Party came about.

Oct 27, 2011 11:42AM
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 Now its on to more interesting things such as criticizing the Tea Party and Herman's 9-9-9 plan.

 

I like Cain.  I don't like his 9-9-9 plan.

 

While I can afford to pay more in taxes, I don't want to because the government just pisses it away.  I want to see cuts in spending before considering any form of increased taxation.

 

The government spending is so out of control, that even if the government confiscated the entire wealth of the top 10% (not just taxing their income at 100%, but took their entire wealth), it would not equal the current deficit, so at the current spending levels, there is no way to balance the Federal budget without putting the additional tax burden on the middle class.

 

It is inevitable that we are going to have to increase taxes on everyone.  But I don't want to pay 1 cent more in taxes until our leaders can prove to me that they can eliminate waste, pork, and use tax revenues wisely.

Oct 27, 2011 8:27AM
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December crude oil contract was trading $2.37 higher at $92.57 a barrel.

So going by this information,

If the U.S.A. had a strong economy Oil would trade at $200 a barrel.
So now a strong Dollar if we ever have one will make oil trade up?
Ok,OK got it.
No matter what we do as a country Green cars,Green houses,Green people.
Oil will rise.
It is the only thing we can tax the crap out of,we have no other revenue stream.
So sad when we have so much more to offer this great Planet.
Oct 27, 2011 10:26AM
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I think we need to create new measures of supposed prosperity rather than using the old stand bys.  At best, the stock market is an indication of how good the well off are doing.  At worst, it's nothing more than a casino for speculators.  Ergo, it has absolutely nothing to do with how the majority are faring in this economy.

 

Also, if the banks absorb 50% of the Greek debt, who is going to end up paying for it?  You know the banks will have to find a way to fund it and most likely this will be by raising interest rates on the other countries debt.  So the dominos are still going to fall, just a little slower than initially supposed.

Oct 27, 2011 12:47PM
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hate to put this in here again,      but _

"and yet, those arrogant SOB's at Exxon/Mobil continue to run ads complaining about increased taxes for the oil industry!!! If they would reinvest some of these obscene profits into job creation, they might get a more sympathetic ear from the American public! Drives me nuts every time I see one of those commercials!

Need to include Royal Dutch/Shell in these comments also, I guess. "Profits doubled"!!"

Oct 27, 2011 10:52AM
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We went from 4 trillion dollar debt to 15 trillion under Obama and its still growing.  We still have 9% unemployment.
Exxon Mobil reported a 41% profit today, can you let us all know how much American Taxes are they going to pay on this amount?
Oct 27, 2011 11:14AM
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Does this mean that we no longer will be seeing the same standard headlines - European Debt Jitters - European Debts Resolved (possibly) - and something new will take its place.  Or have all the 'troubles of the world' been resolved and only Happy Day's are on the horizon.

I'm glad the market is doing better, the jobless rate is less (marginally) etc. but my real hope - whether the market goes up or down is that the concerted effort is applied to the REAL problems America has - headlines reflect what is happening here, and not somewhere else.

While I am concerned with global events, I am more concerned with my own front door.  I think it's time we fixed that before going outside.
Oct 27, 2011 11:26AM
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jacobhalo, no obama fan here, but he did not run up the deficit from $4T to $15T. It was approximately $5T when Bush took office and Bush ran it up to about $10.5T in his 8 crappy years. Obama has run it up to the $15T mark in just under 3 very crappy years.
Oct 27, 2011 10:49AM
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Hum lets see now.  Jobless claims stay over 400k,   pending-home sales fell 4.6% in September.  Oil heading above 100.   But wait europe is being bailed out,   If it looks like a duck and it quacks like a duck it probably is a duck.
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