S&P 500 Surges to a 4-Year High on Euro Optimism

Bikram Pandey
06 Sep, 2012
New York City

Wall Street extended the rally in European markets after the central bank followed through its promise to devise a plan to buy unlimited amount of euro zone bonds and arrest the rising bond yields in the region. Tech stocks were in focus after Amazon.com Inc joined others to release updated devices.

[R]4:00 PM New York – Wall Street extended the rally in European markets after the European Central Bank followed through its promise to devise a plan to buy unlimited amount of euro zone bonds and arrest the rising bond yields in the region. Tech stocks were in focus after Amazon.com Inc joined others to release updated devices.[/R]

U.S. indexes extended gains and markets in Europe surged more than 2% after European Central Bank announced a plan to support euro zone bonds with unlimited purchase and offer a fully effective backstop.

The central bank held rates at 0.75% and offered a forceful support for the bonds in the region and followed up on its earlier promise to defend the euro at all costs.

Market indexes in Europe soared more than 2% and lifted averages on Wall Street as much as 2%.

In addition, a U.S. survey showed private sector employment rose in August and weekly jobless claims fell to 365,000.

On the corporate front, Realty Income agreed to acquire American Realty Capital for $2.95 billion. Tax preparation services provider, H&R Block ((HRB)) said first quarter net loss narrowed after it took steps to cut costs and specialty retailer Men’s Wearhouse ((MW)) said quarterly net increased 9% and lifted annual outlook.

Amazon.com Inc ((AMZN)) released a series of new tablet devices in a crowded market that are expected to be priced between $199 and $299 each and lowered the price on its original Kindle Fire to $159. Amazon is also looking to release its smartphone that will compete with the successful iPhone and other Android based devices.

Navistar net plunged 94% but stock surged more than 15% after the interim chief executive said restructuring will cut costs and business will improve in the next six quarters. The payment processor, VeriFone ((PAY)) net jumped 43% but drug store Walgreen Company ((WAG)) sales dropped in August and in fourth quarter and struggled with earnings growth.

Across the Atlantic, market indexes soared after the European Central Bank left its key lending rate unchanged and announced a plan to buy unlimited amount of government bonds. The widely expected move dragged the yields of Spain and Italian bonds lower. Generali agreed to sell its stake in Migdal for €705 million.

In the economic news, the euro zone economy contracted in the second quarter. German factory orders rose more than estimated in July and record jobless rate in Greece in June. Riksbank unexpectedly lowered repo rate by 25 basis points.

The UK indexes soared after the ECB announced the bond purchase plan and the International Monetary Fund agreed to disburse $1.15 billion to Ireland. UK home prices declined in August. Whitbread jumped 6% after second quarter sales increased 15%.

Stocks in Tokyo close unchanged ahead of the central bank policy decision in the euro zone. Yamaha Motor Co jumped 11% after it estimated higher motorcycle sales in Indonesia.

Australian unemployment rate declined to 5.1% in August but worker participation rate fell as younger people find it difficult to gain jobs outside the mining sector. Qantas sealed its alliance with Dubai based Emirates and Lynas won a temporary approval to start its refinery in Malaysia.

Commodities, Bonds and Currencies

The yield on 10-year bond increased to 1.67% and on 30-year bond closed at 2.80%.

The U.S. dollar inched lower to $1.264 to a euro and increased against the Japanese yen to 78.88 yen.

Immediate delivery futures of Texas crude oil increased 20 cents to $95.56 a barrel and Brent crude added 98 cents to $113.60, futures of natural gas fell 0.02 cents to $2.72 per mbtu and gasoline price edged up 4.4 cents to 299.40 cents a gallon.

In metals trading, copper decreased 1.30 cents to $3.51 per pound, gold added $11.80 to $1,705.80 per ounce and silver added 39 cents to $32.75.