Stock advance on Europe hopes

October 12, 2011: 5:01 PM ET
u.s. stock market

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NEW YORK (CNNMoney) -- A broad rally lost steam during the final minutes of trading, but stocks still ended sharply higher Wednesday as investors welcomed the latest plan to recapitalize European banks.

"We're continuing to see a shift in investor sentiment," said Art Hogan, managing director at Lazard Capital Markets. "Last week, it seemed like the sky was falling and there was no end in sight. Now, there's a perception that Europe will come up with a TARP-like backstop for European banks."

European Commission president Jose Manuel Barroso said Wednesday that policymakers need to act immediately to resolve the long-running crisis. Barroso also said that banks that do not satisfy capital requirements should be barred from paying out dividends and bonuses.

"We still don't have a concrete plan, but it seems like officials have more of a sense of urgency and are talking about credible solutions, which is exactly what the market needs," said Hogan.

The Dow Jones industrial average (INDU) rose 102 points, or 0.9%, the S&P 500 (SPX) added 12 points, or 1%, and the Nasdaq composite (COMP) gained 22 points, or 0.8%. Earlier in the session, all three indexes were up about 2%, and the the Dow briefly turned positive for the year.

Barroso calls for immediate action on debt crisis

Financial stocks were leading the gains, with JPMorgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500) up between 2% and 5%.

Stocks have been climbing since the start of the month as hopes for a solution to Europe's debt crisis continue to grow.

Wednesday's advance was the sixth out of the last seven days for the S&P 500 and Nasdaq, and fifth for the Dow. The three major indexes are up between 8% and 11% since Oct. 3, when stocks hit their lowest levels in more than a year.

Every development overseas is getting investors' front-and-center attention. More than 80% of the experts surveyed by CNNMoney agree that debt problems overseas are the most challenging hurdle for the market.

U.S. stocks ended mixed Tuesday as investors spent most of the day waiting for the outcome of Slovakian parliament's vote to overhaul the EFSF. Shortly after U.S. markets closed Tuesday, Slovakia voted the measure down.

The proposed bailout needs to be ratified by all 17 eurozone nations, and Slovakia was the last country to vote. Investors expect that in its second round of voting later this week, with a new government in place, Slovakia will manage to pass the bailout, said Hogan.

Companies: Shares of Alcoa (AA, Fortune 500) slipped after the aluminum producer reported quarterly income that fell short of analysts' expectations, but the company brought in more revenue than anticipated.

PepsiCo (PEP, Fortune 500)'s stock rose after the company reported stronger revenue Wednesday on global snack and beverage volume. PepsiCo also saw gains from its the acquisition of Wimm-Bill-Dann, a Russian dairy and juice company.

Overall, S&P 500 company earnings are expected to have climbed almost 13% in the third quarter of 2011, according to earnings tracker Thomson Reuters. Revenue of the companies in the benchmark index are expected to have risen 10%.

Meanwhile, shares of Liz Claiborne (LIZ) surged after the apparel and accessories maker announced it is selling several of its brands for $328 million. J.C. Penney (JCP, Fortune 500) is buying the company's namesake Liz Claiborne brand as well as the Monet brand. Liz Claiborne also sold its Dana Buchman brand to Kohl's (KSS, Fortune 500).

Shares of Wal-Mart (WMT, Fortune 500) moved higher after company executives told an annual meeting for analysts that same-store sales have been positive for the past three months. Sales at the world's largest retailer have been declining for nine straight quarters. Wal-Mart is scheduled to report third-quarter results next month.

Research in Motion's (RIMM) stock dipped as the BlackBerry outage that started on Monday in Europe, the Middle East and Africa continued to spread, hitting customers in the United States and Canada on Wednesday.

Economy: Federal Reserve policymakers left the door open to another round of asset purchases, or QE3, in the near future, according to minutes of their most recent meeting. In September, the central bank stopped short of expanding its balance sheet and launched so-called Operation Twist, a program to shift assets from short-term Treasuries into long-term Treasuries.

The U.S. Senate failed Tuesday to approve President Obama's jobs bill. The 50-49 vote in favor of the measure fell short of the 60 senators needed to advance the $447 billion dollar plan.

The city council of Harrisburg, Pa., voted to file for bankruptcy protection Tuesday night. The state capital of Pennsylvania, with just under 50,000 residents, was facing a possible takeover of its operations by the state government under a receivership.

World markets: European stocks finished with strong gains. Britain's FTSE 100 (UKX) ticked up 0.7%, the DAX (DAX) in Germany gained 2% and France's CAC 40 (CAC40) added 2.2%.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) jumped 3% and the Hang Seng (HSI) in Hong Kong added 1%, while Japan's Nikkei (N225) slipped 0.4%.

Currencies and commodities: The dollar lost ground against the euro and the British pound, but rose versus the Japanese yen.

Oil for November delivery fell 24 cents to settle at $85.57 a barrel.

Gold futures for December delivery rose $21.60 to $1,682.60 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.23% from 2.16% late Tuesday. To top of page

Index Last Change % Change
Dow 17,071.22 -41.93 -0.25%
Nasdaq 4,505.85 -6.34 -0.14%
S&P 500 1,977.80 -5.05 -0.25%
Treasuries 2.49 -0.04 -1.74%
Data as of 8:02am ET
Company Price Change % Change
Ford Motor Co 15.11 -1.22 -7.47%
Bank of America Corp... 17.01 -0.02 -0.12%
Apple Inc 100.11 -0.62 -0.62%
Yahoo! Inc 40.52 -0.14 -0.34%
Facebook Inc 79.00 0.21 0.27%
Data as of Sep 29
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15 yr fixed3.22%3.26%
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15 yr refi3.27%3.25%
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