Wall Street bounces back on eurozone rescue action | business | Hindustan Times
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Wall Street bounces back on eurozone rescue action

US stocks rebounded strongly, with the blue-chip Dow index closing up nearly four per cent after a massive rescue package for the eurozone eased investors’ fears of a sovereign debt crisis.

business Updated: May 11, 2010 10:39 IST

US stocks rebounded strongly, with the blue-chip Dow index closing up nearly four per cent after a massive rescue package for the eurozone eased investors’ fears of a sovereign debt crisis.

The Dow Jones Industrial Average jumped 404.71 points (3.90 per cent) to 10,785.14 following a turbulent week for Wall Street that saw the index plummet almost 1,000 points briefly on Thursday.

Following overnight strong gains by Asian and European stocks, the Dow posted its loftiest single-session point increase since March 2009.

The Nasdaq composite shot up 109.03 points (4.81 per cent) to 2,374.67, the tech-rich index’s first triple-digit gain since October 2008, while the broad-market Standard & Poor’s 500 index climbed 48.85 points (4.40 per cent) to 1,159.73.

Investors reacted positively to the joint adoption by the European Union and the International Monetary Fund early Monday of a 750-billion-euro (trillion-dollar) aid package for Greece and its eurozone neighbours to stem a crisis that threatened global economic recovery.

After the announcement, the US Federal Reserve, the European Central Bank and central banks in Japan, Britain, Canada and Switzerland said they would intervene to ensure that dollar shortages did not occur in European markets.

Some pundits wonder whether yesterday’s massive stock gain was the start of a rebound to 2010 highs -- set just a couple of weeks ago -- or just a short-term relief rally from last week’s slide, which culminated in the worst weekly loss in one year, analysts at Briefing.com said.

“Time will tell if this coordinated action is successful. For now, it is spurring a massive relief trade based on the notion that it might just be the answer,” said Patrick O’Hare, a top market analyst at Briefing.com.

“Anyway, while there is a sense of relief in the market today about the monetary force being applied, there will be a fiscal price to pay for this bailout for those who need it,” he cautioned.

The rescue deal consists of 440 billion euros from eurozone countries and 60 billion euros of loan funds from the European Commission. The Spanish finance minister, Elena Salgado, said the IMF would offer a 250-billion-euro facility.

Analysts at Charles Schwab & Co said the financial rescue package on top of a 110-billion-euro EU-IMF bailout of Greece had cooled eurozone debt contagion fears and preserved the outlook for the continuation of the global recovery.

“Our opinion is that the risk-reward ratio has become positive again,” said Wells Fargo chief market strategist Al Goldman.