US debt discussion boosts Wall Street

US stocks climbed yesterday as signs of progress on the US debt talks and concrete action from Europe on its own debt crisis heartened investors.

Unexpectedly robust earnings results from Morgan Stanley, whose shares rose 11 per cent to $24.20, extended a relief rally in bank stocks after Goldman Sachs’ dismal trading profits stunned the market earlier in the week.

But the biggest news was on a possible US debt deal to save the United States from an unprecedented default.

The KBW Capital Markets index rose 2.9 per cent.

In Europe, following a summit, Eurozone leaders agreed the private sector would provide a net €37bn to a second bailout package for Greece, with the total official financing around €109bn.

The Dow Jones industrial average gained 152.50 points, or 1.21 per cent, to 12,724.41. The Standard & Poor’s 500 Index rose 17.96 points, or 1.35 per cent, to 1,343.80. The Nasdaq Composite Index advanced 20.20 points, or 0.72 per cent, to 2,834.43.

Stocks rallied to session highs after the White House said it saw momentum for a balanced deficit deal, but denied reports that US President Barack Obama and Republican US House of Representatives speaker John Boehner were close to a pact.

Transportation shares also contributed to gains after Union Pacific Corp posted higher quarterly profits. Shares of the railroad company rose 4.6 per cent to $104.40, and the Dow Jones transportation index was up 1.7 per cent.

Biotechnology issues also rose. Alexion Pharmaceuticals jumped 9.1 per cent to $56.77 after the drugmaker posted better-than-expected quarterly earnings and raised its 2011 outlook. The NYSEArca biotech index climbed 1.8 percent.

On the downside, Dow component Intel shed 0.8 per cent to $22.81, a day after the chipmaker trimmed its forecast for 2011 personal computer unit sales.

After the closing bell, Microsoft Corp shed 0.8 per cent to $26.87 after the world’s largest software company greater-than-expected 30 per cent increase in fiscal fourth-quarter profit, but profit from its core Windows product fell on soft personal computer sales.

Volume saw an upswing with about 8.22bn shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 7.49bn.