Stocks soar 3% on Europe deal

October 27, 2011: 4:40 PM ET
u.s. stocks

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NEW YORK (CNNMoney) -- Europe finally has a deal, and investors are pleased ... for now.

U.S. stocks rallied right out of the gate Thursday, with the major indexes jumping about 3%, after European Union leaders agreed to expand Europe's bailout fund and take major losses on Greek bonds.

The Dow Jones industrial average (INDU) shot up 340 points, or 2.9%. The S&P 500 (SPX) gained 43 points, or 3.4%, and the Nasdaq composite (COMP) surged 88 points, or 3.3%.

The day's rally pushed the S&P 500 into positive territory for the year for the first time since Aug. 4. The broad index is now on track for its best monthly performance since October 1974.

The gains also pushed the Dow above the 12,000 mark for the first time since Aug. 1. The blue-chip index is headed for its best month since January 1987.

The tech-heavy Nasdaq is on track for its biggest monthly gains since October 2002.

Europe's biggest baby step

Stocks have been rallying on the promise of deal to tackle Europe's debt saga since the start of October. That long-awaited promise was delivered, with a eurozone debt agreement announced early Thursday, following marathon talks aimed at finding solutions for Europe's debt and banking crisis.

"The deal is certainly good news, and a major step that will help avoid a replay of 2008 in the banking system," said Bob Andres, chief investment officer and strategist at Merion Wealth Partners.

The euro rallied 2% versus the dollar and world markets jumped on the news, led by the financial sector. Shares of Credit Agricole, BNP Paribas and Societe Generale rose about 20% in Paris. In Germany, Deutsche Bank shares climbed more than 15%.

Financial stocks were also leading the way in U.S. trading. Shares of Morgan Stanley (MS, Fortune 500) spiked 17%, after being beaten down amid fears that the bank could suffer big collateral damage due to its exposure to French banks that have big ties to Greece.

Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) rallied between 8% and 10%.

The market's fear gauge, the VIX (VIX), tumbled almost 15% Thursday to the lowest levels since early August. The measure has dropped more than 40% since the start of the month.

Though investors are relieved, details about the deal remain dicey, said Andres, and the plan doesn't go far enough to tackle the structural problems that are hindering economic growth in the region.

Dear China, please buy our debt! XOXO, Europe

"We can't forget the Europe is basically in a recession, and that this plan will do absolutely nothing to address economic growth, or any kind of problem that might pop its head up in Italy or other eurozone countries," he said.

U.S. stocks closed higher Wednesday, as investors became increasingly confident that a deal to address the debt crisis was close.

World markets: European stocks closed with stellar gains. Britain's FTSE 100 (UKX) climbed 2.5%, the DAX (DAX) in Germany rallied 5.4%, and France's CAC 40 (CAC40) jumped 5.7%.

Asian markets ended higher. The Shanghai Composite (SHCOMP) edged up 0.3%, the Hang Seng (HSI) in Hong Kong gained 3.3% and Japan's Nikkei (N225) rose 2%.

The Bank of Japan announced early Thursday it is boosting purchases of government bonds to help stimulate the economy, warning of a strong yen and ongoing risks in global financial markets and overseas economies.

Economy: The U.S. government reported that third-quarter gross domestic product -- the broadest measure of a country's economic activity -- increased at an annual rate of 2.5%. The pace of growth was in line with expectations, and was nearly double the 1.3% growth rate in the second quarter.

How has the economy changed your financial values?

The Labor Department said weekly jobless claims eased by 2,000 to 402,000 last week -- also in line with expectations.

Companies: Shares of Exxon Mobil (XOM, Fortune 500) rose after the oil company posted a quarterly profit of $10.3 billion, a 41% increase from a year earlier, thanks to higher oil and gas prices.

Citrix (CTXS) shares jumped, leading the gains on the S&P 500 and Nasdaq. The virtual computing company delivered earnings and a forecast above Wall Street's expectations.

Shares of Akamai Technologies (AKAM) were also sharply higher, after the company posted earnings above estimates and issued a solid outlook. The company also said that its president David Kenny had resigned.

Meanwhile, shares of Avon Products (AVP, Fortune 500) tumbled, after the company said it is being investigated by the Securities and Exchange Commission for possibly bribing foreign officials.

Currencies and commodities: The dollar fell against the euro, the Japanese yen and the British pound.

Oil for December delivery gained $3.76 to settle at $93.96 a barrel.

Gold futures for December edged up $24.20 $1,747.70 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.40% from 2.20% late Wednesday.  To top of page

Index Last Change % Change
Dow 17,042.90 -28.32 -0.17%
Nasdaq 4,493.39 -12.46 -0.28%
S&P 500 1,972.29 -5.51 -0.28%
Treasuries 2.51 0.02 0.68%
Data as of 5:47am ET
Company Price Change % Change
Ford Motor Co 14.79 -0.32 -2.12%
Bank of America Corp... 17.05 0.04 0.24%
eBay Inc 56.63 3.97 7.54%
Apple Inc 100.75 0.64 0.64%
General Electric Co 25.62 0.20 0.79%
Data as of Sep 30
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15 yr fixed3.25%3.21%
5/1 ARM3.48%3.32%
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15 yr refi3.30%3.21%
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