US stocks rose yesterday as sentiment swung toward hope European officials would find a way to cut Greece’s debt and shore up European banks.
Shares rallied to session highs in the afternoon after a report said a plan to leverage money from the European Financial Stability Facility was in the works.
Investors were reluctant to make long-term commitments because of conflicting reports about whether or not European officials were preparing to take bold new action to solve the crisis.
“Given how markets have behaved over the past two months, people are interested in the vaguest of rumors because any kind of action being taken would be well-received,” said Michael Church, president of Addison Capital in Yardley, Pennsylvania.
Markets have been highly sensitive to European efforts to cauterise the Eurozone’s credit crisis that has Greece teetering near a default.
Last week, the Dow had its biggest weekly loss since the depths of the financial crisis in October 2008 while the S&P 500 shed 6.6 per cent for the week.
Financial shares were among the session’s best performers, with the KBW bank index up 5.2 percent. Dow component JPMorgan Chase & Co advanced 7 per cent to $31.65 while Citigroup gained 7 per cent to $26.72.
However, gains on the Nasdaq were limited after a report on Apple suggested the tech company was cutting back on some key orders.
Talk of plans for a 50 per cent write-down in Greek debt and improvements in the Eurozone rescue fund buoyed the market, although European officials called the talk premature.
A CNBC report cited a top European official who said the plans involved using leverage and the European Investment Bank to buy sovereign debt to save European banks.
The Dow Jones industrial average ended up 272.38 points, or 2.53 per cent, at 11,043.86. The Standard & Poor’s 500 Index was up 26.52 points, or 2.33 per cent, at 1,162.95. The Nasdaq Composite Index was up 33.46 points, or 1.35 per cent, at 2,516.69.
The CBOE Market Volatility index fell 4.8 per cent but remains up 24 per cent for the month.
Apple fell 0.3 per cent to $403.17 after an analyst said the iPhone maker was cutting orders from suppliers of parts for its iPad tablet. The tech bellwether fell as much as 3.2 per cent earlier in the session.