U.S. stocks closed modestly higher Wednesday, as investors look beyond the latest development in Europe to focus on the possibility that the Federal Reserve will announce another round of quantitative easing.
The Dow Jones industrial average, the Nasdaq and the S&P 500 ended the day up between 0.1% and 0.3%, following a critical decision by Germany's Constitutional Court. The court dismissed complaints on the legality of the European Stability Mechanism, a permanent bailout fund that's expected to have a maximum lending capacity of €500 billion.
Most European stocks rose on the news. The DAX in Germany was 1.9% higher at the close of trading, while France's CAC 40 rose 1%. Asian markets, which closed ahead of the German court decision, ended higher.
Investors were anxious about how the ruling would impact the European Central Bank's plans to preserve the euro, which remained at its highest level against the U.S. dollar in four months early Wednesday.
"This is good news for the EU and has certainly been reflected in the value of the euro across the board," said Chris Towner, director of foreign exchange advisory services at HiFX. "This gives a foundation for the EU leaders to start to put a proper framework in place for further integration."
As stocks around the globe reacted, investors bailed out of U.S. Treasuries, sending the yield on the benchmark 10-year note up to 1.76% from 1.69% late Tuesday. Investors are already turning their attention to the Federal Reserve, which many hope will announce more stimulus when its two-day policy meeting concludes on Thursday.
Bank stocks initially got a lift from the expectations of another round of quantitative easing, or QE3, with Citigroup (C) jumping nearly 2%. Citi, JPMorgan (JPM), Morgan Stanley (MS) and Wells Fargo (WFC) all pared their gains, closing up about 1%.
In other corporate news, Apple (AAPL) unveiled the iPhone 5, a thinner, lighter version of its iconic phone at an investor event. Shares of the company closed the day up 1.4%.
Economy: The U.S. Bureau of Labor Statistics reported Wednesday that import prices rose 0.7% in August, after declining 0.7% the prior month. Export prices rose 0.9% in August, after rising 0.4% the prior month. The government also reported that total inventories rose 0.7% in July.
Companies: Facebook (FB) shares rose more than 7%, a day after CEO Mark Zuckerberg made his first public interview since the company's IPO. Speaking at TechCrunch Disrupt in San Francisco, Zuckerberg said he was disappointed by the stock's performance and pledged to stick to Facebook's mission.
Aerospace companies BAE Systems (BAESY)and European Aeronautic Defence & Space Co. (EADSY) are reportedly in merger talks.
Chesapeake Energy (CHK)agreed to sell most of its properties in the Permian Basin in West Texas for roughly $6.9 billion. The natural gas company will sell the Delaware Basin portion to Royal Dutch Shell in a deal valued just below $2 billion. Chevron (CVX) and Global Infrastructure Partners will also buy portions of the acreage.
Commodities: Oil for October delivery slipped 16 cents to $97.01 a barrel. Gold futures for December delivery fell $1.20 to $1,733.70 an ounce. Oil and gold have both rallied lately due to the rising hopes for QE3 and a weaker dollar that could come with it. Oil tends to benefit from a weaker dollar while gold is often viewed as a classic hedge against inflation.
