Wall Street Soars on Euro Hopes, Data
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The markets soared on Friday as traders cheered upbeat consumer sentiment data, corporate news, and grew cautiously optimistic that European leaders would be able to keep the debt crisis in check.
Today's Markets
The Dow Jones Industrial Average jumped 260 points, or 2.2%, to 12,154, the S&P 500 gained 24.2 points, or 2%, to 1,264 and the Nasdaq Composite rose 53.6 points, or 2%, to 2,679.
In a sign of the breadth of the rally, every Dow component was in the green, led by surging Disney (NYSE:DIS) shares. The owner of famous American brands like Mickey Mouse and ESPN posted earnings that far exceeded expectations.
Volatility, meanwhile, plummeted 8.6% as traders piled back into the markets for a second-straight day after fleeing on Wednesday in the worst rout in months.
It has been a tumultuous week for Wall Street as market participants have parsed through a deluge of headlines on the euro zone's sovereign debt crisis. Indeed, even with a steep selloff on Monday, the rally was powerful enough to knock the S&P 500 and the Nasdaq into the green for the year.
Italy, the euro zone's third-biggest economy, is making headway on passing economic reforms that analysts see as a crucial part of knocking down its enormous $2.6 trillion public debt load. The country's Senate approved a key debt-reduction law on Friday, which paves the way for final approval over the weekend. Additionally, Prime Minister Silvio Berlusconi agreed to resign after the law is passed, potentially opening the door to the formation of an emergency coalition government that may be led by former European Union Competition Commissioner Mario Monti. Monti is seen by many analysts as having the capacity to run an emergency government that is capable of passing the reforms.
Italy saw its 10-year bond yields spike above 7% on Wednesday -- the level that forced Greece, Ireland and Portugal to require a bailout from EU governments and the International Monetary Fund. The yield has fallen close to a percentage point from the highs on Wednesday, however, according to data compiled by FOX Business. With the country's much more prominent economic standing, it has become more crucial than ever, analysts say, for Italy to convince the markets it can adapt reforms so it can sustain itself to retain access to financing in the private marketplace.
"We are not out of the woods just yet," Manoj Ladwa, a senior trader at London-based ETX Capital, warned in an interview with FOX Business, citing the still-dicey political climate in Europe and the bounty of economic data on tap for next week.
Indeed, it remains unclear whether the entire continent has the firepower, or the political will, to rescue one of the world's biggest economies if it became necessary. Plus political instability could potentially still force early elections instead of a unity government, while the chances of that setback are seeming slimmer.
European blue chips soared 3.1%, while the euro leaped 0.97% to $1.373. Meanwhile, the U.S. dollar tumbled 0.88% against a basket of six world currencies.
On the U.S. front, consumer sentiment data topped expectations. The Reuters/University Michigan gauge of sentiment jumped to 64.2 in early November from a final reading of 60.9 in October, easily besting estimates of 61.5. With the kick off of the crucial holiday shopping season looming just weeks away, sentiment data is particularly important. Analysts will be looking to see how the continuing market turmoil, Europe's debt crisis and a still-weak labor market is affecting the consumer.
Retailers like Wal-Mart (NYSE:WMT) and Best Buy (NYSE:BBY) may be particularly affected by these data. The consumer sector is also a major part of the broader economy, so a large swath of other companies may be affected as well.
In energy markets, crude oil prices are heading back toward the $100 mark after moderating in recent weeks. The benchmark WTI contract traded in New York climbed $1.21, or 1.2%, to $98.99 a barrel. Wholesale RBOB gasoline fell 3 cents, or 1.3%, to $2.60 a gallon.
Gold rose $28.50, or 1.6%, to $1,788 a troy ounce. U.S. government debt markets are closed for the Veterans Day holiday.
Foreign Markets
European blue chips soared 3.1%, the English FTSE 100 climbed 1.9% to 5,445 and the German DAX rallied 3.2% to 6,057.
In Asia, the Japanese Nikkei 225 edged 0.16% higher to 8,514 and the Chinese Hang Seng jumped 0.91% to 19,137.