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Bond markets may be closed for Columbus Day on Monday, but that hasn't prevented the bulls on Wall Street from driving the Dow almost 300 points higher amid enthusiasm for new pledges from the leaders of France and Germany to strengthen Europe's banks.
As of 2:36 p.m. ET, the Dow Jones Industrial Average soared 276.10 points, or 2.49%, to 11379.06, the Standard & Poor's 500 jumped 33.66 points, or 2.91%, to 1188.96 and the Nasdaq Composite leaped 75.75 points, or 3.06%, to 2555.12. The FOX 50 gained 24.01 points, or 2.85%, to 867.88.
Without any major economic reports on the agenda, Wall Street continues to take its cues from Europe amid the sovereign debt crisis there. The triple-digit burst of buying puts the blue chips on track for their fourth gain in five sessions.
“I think market sentiment has shifted to a modestly positive tone. Current pricing is, frankly, relatively cheap relative to what earnings should be,” said Peter Kenny, managing director at Knight Capital. Kenny also said, “The tone out of Europe has become a lot more constructive over the last week or so” thanks to “pretty aggressive, very proactive policy initiatives spearheaded by both France and Germany.”
Over the weekend German Chancellor Angela Merkel and French President Nicolas Sarkozy promised to take action before the end of October to fix the continent's debt mess and shore up their banks. The leaders of the two largest euro-zone countries said they are close to a deal to recapitalize embattled European lenders. However, Merkel and Sarkozy stopped short of laying out specifics of a plan.
Because of Europe's ties to the global financial and economic systems, the deepening sovereign debt crisis has hurt stocks and growth around the world in recent months.
In another sign Europe is attempting to get the crisis under control, France and Belgium quickly teamed up to nationalize and break up municipal lender Dexia, which had been teetering on the verge of collapse due to its enormous exposure to Greek bonds. Dexia, which appears to be the first banking victim of the current crisis, quickly reached a deal to receive $121 billion in state guarantees and sell its Belgium unit to the government for $5.4 billion.
“They weren’t playing games with that. It wasn’t dragged on, for a change,” said Kenny.
On the other hand, Greek stocks plunged after the government was forced to nationalize Proton Bank.
Tech stocks also rallied in the U.S. as Apple (NASDAQ:AAPL) said it sold a record 1 million iPhone 4S devices in a single day and IBM (NYSE:IBM) hit a new record high.
All 30 blue-chip stocks were in the green, led by banking giants Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM). Safer plays like McDonald’s (NYSE:MCD) and Kraft (NYSE:KFT) saw smaller percentage gains.
Commodities weren't left out of the Columbus Day rally as crude oil soared $2.43, or 2.93%, to $85.41 and gold gained $35.00 a troy ounce, or 2.14%, to $1,674.40.
Earnings season is set to kick off this week as aluminum maker Alcoa (NYSE:AA) releases its quarterly results after Tuesday's closing bell. Whether or not companies are able to meet and even exceed expectations for earnings is likely to be a key driver for stocks for the next several weeks. Financial stocks are expected to disclose steep declines in quarterly profits.
Last week U.S. stocks stopped their slump, with the Dow rallying 1.7% and the Nasdaq Composite leaping almost 3% amid hopes policymakers in Europe are finally taking the crisis seriously. However, stocks closed in the red on Friday as enthusiasm for a better-than-expected jobs report was drowned out by a credit ratings downgrade for both Spain and Italy.
“If the European debt crisis were to suddenly disappear, stocks would appear very cheap (some would say dirt cheap), but of course the uncertainty over the debt crisis remains the critical wildcard,” Bob Doll, chief equity strategist at BlackRock, wrote in a note.
Yahoo! (NASDAQ:YHOO) jumped 3% as Reuters reported co-founder Jerry Yang is interested in teaming up with private-equity firms to take the struggling Internet giant private. Meanwhile, Bain Capital has emerged as another potential suitor for Yahoo! and Chinese Internet company Alibaba has reportedly held talks with Singapore’s Temasek about providing financing to buy the 40% investment Yahoo! holds in itself.
Netflix (NASDAQ:NFLX) abandoned its unpopular plan to separate its DVD-by-mail service and rename it Qwikster, caving to customer dissatisfaction. The company's stock initially leaped on the announcement, but then retreated on a downgrade to "neutral" from "outperform" by Wedbush.
Sprint Nextel’s (NYSE:S) stock plunged another 13% to 2009 levels after a slew of analysts downgraded the No. 3 wireless company. Sprint’s stock has been in free fall on concerns about the need to raise more cash due to costly plans to roll out its own 4G network and sell the iPhone.
Superior Energy (NYSE:SPN) agreed to be acquire energy services company Complete Production Services (NYSE:CPX) for $6.2 billion. The $32.90-a-share deal represented a 62% premium on Complete’s close on Friday.
London's FTSE 100 rose 1.80% to 5399.00, Germany's DAX surged 3.02% to 5847.29 and France's CAC 40 rallied 2.13% to 3161.47.
In Asia, the Japanese Nikkei 225 was closed for a holiday, but Hong Kong's Hang Seng inched up 0.02% to 17711.10.