Wall Street Soars on Greece, China Optimism

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Wall Street rallied into the close of trade on Friday as optimism over a Greek debt deal coupled with a two-day rally in the Chinese stock market and Yellen rate-hike comments, sent stocks solidly higher.

The Dow Jones Industrial Average jumped 211 points, or 1.21% to 17760. The S&P 500 added 25 points, or 1.23% to 2076, while the Nasdaq Composite rose 75 points, or 1.53% to 4997.

All ten S&P 500 sectors ended in positive territory, with information technology and materials leading the charge higher.

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In a speech at the City Club of Cleveland midday Friday, Yellen said despite global economic turmoil, she is supportive of initiating the first interest rate increase in the U.S. “at some point this year,” but she hedged slightly given the tumult in Greece and China.

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“I want to emphasize that the course of the economy and inflation remains highly uncertain and unanticipated developments could delay or accelerate this first step,” she said in the speech.

Yellen went on to say that the central bank will continue to closely monitor any and all economic data in the U.S., particularly continued improvement in the labor market and inflation that moves back to the Fed’s 2% target in “the next few years.”

Meanwhile, traders in the U.S. cheered progress in Greek debt negotiations on Friday after the debt-laden nation late Thursday offered a new bailout proposal in an effort to prevent a forced exit from the eurozone.

Despite weeks of insistence a debt deal would not include tax breaks and pension reform, the Greeks latest proposal closely mirrored a previous proposition from the Europeans. In exchange for a three year, $59.4 billion bailout, the proposal package contained economic policy overhauls and budget cuts that include tax hikes on shipping companies, changes to its value-added tax rate on restaurants from 6.5% to 23%, and pension reform.

A vote by the Greek parliament on the latest proposal began on Friday around 12:00 p.m. ET. Some worried about the outcome of the debate considering the Greek people on Sunday voted “no” to harsher austerity measures in a referendum. The vote would give Prime Minister Alexis Tsipras authority to then negotiate the proposal with the nation’s creditors over the weekend.

“Alexis Tsipras looks to have given way on many of the sticking points of the past week,” Chris Beauchamp, senior market analyst at IG said in a note. “He may still try to present any deal as a victory for Greece, but the real truth is that the creditors have prevailed.”

Optimism over a Greek debt deal spread through European markets on Friday. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, closed up 3.24% to 3530. Meanwhile, the German Dax climbed 2.85 % to 11310, the French CAC 40 rose 3.16 % to 4907, while the UK’s FTSE 100 ended1.40 % higher to 6673.

In currencies, the euro rose 0.87% against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note rose 0.116 of a percentage point to 2.417%. Bond yields move in the opposite direction of prices.

Still, despite the optimism from the developments in Athens, some remain puzzled about how this outcome came to be.

“The Euro is rallying as are futures and rightfully so,” Dan Greenhaus, chief global strategist at BTIG said in a note. “Following the referendum’s ‘no’ vote, we and others have suggested that a Greek exit was now the likely scenario. The reason for feeling this way was rooted in the referendum itself. Why hold the referendum, why put one’s country through what Greece has been through, if obtaining more favorable terms? This is completely confusing to us.”

While focus turned to Greece Friday, investors still kept a close eye on China where the regulators there have gone to extraordinary lengths – including a ban on large stakeholders from selling their shares in public companies – to curb a recent, steep selloff there. In light of the new regulations, China’s Shanghai Composite index rallied 4.54% for a second day to close with its biggest two-day gain in seven years.

“The measures being implemented in China increasingly smack of desperation and when the markets do become free to trade, the stampede for the exit might be even more aggressive than the sell-off this summer has already seen,” IG Analyst Alastair McCaig wrote in an early morning note.

Elsewhere in Asia, Hong Kong’s Hang Seng gained 2.08% to 24901, while Japan’s Nikkei shed 0.38% to 19779.

In commodities, oil settled mostly flat with U.S. crude futures down 0.09% to $52.73 a barrel. Brent crude was unchanged at $58.62 a barrel. Gold rose 0.13% to $1,160 a troy ounce.