NEW YORK — Hope that European leaders will take steps to ease the region’s debt crisis sent stocks surging to their best day this year Wednesday. NEW YORK — Hope that European leaders will take steps to ease the region’s
NEW YORK — Hope that European leaders will take steps to ease the region’s debt crisis sent stocks surging to their best day this year Wednesday.
Speculation the Federal Reserve could make another move to help the flagging U.S. economy also drove traders out of bonds and into stocks Wednesday after weeks of losses.
News reports said Germany and European Union officials were considering a plan to lend money from the European bailout fund to help rescue Spain’s hobbled banks.
Jeff Kleintop, chief market strategist at LPL Financial, said the market appeared to be turning on rumors. But all the talk was enough to convince some traders the worst was over for now.
As of Monday, worries about Greece and Spain had pulled the Standard & Poor’s 500 index down nearly 10 percent from its peak in early April. “The next 10 percent move is not down, it’s up,” Kleintop said.
The rally started early and gathered force in the afternoon. The charge turned the Dow Jones industrial average positive for 2012 and erased the biggest loss of the year less than a week after it happened: the 275-point plunge set off by a dismal U.S. jobs report Friday.
The Dow Jones industrial average surged 286.84 points Wednesday to close at 12,414.79, its biggest gain since Dec. 20.
LPL has started to pull back on bets against the S&P 500 and the euro. “We’ve decided it’s time to declare victory,” Kleintop said.
A speech by a Federal Reserve official also added to speculation the Fed may take more steps to bolster the U.S. economic recovery. Dennis Lockhart, president of the Fed’s Atlanta regional bank, said weak job growth over the past two months highlighted the “halting and tenuous” recovery. If the trend continues, “further monetary actions to support the recovery will certainly need to be considered,” he said.
Federal Reserve Chairman Ben Bernanke will likely be asked about more actions to help the economy when he testifies before a congressional committee today.
Companies whose stocks have been clobbered the most over the past month had the best gains. Homebuilders rallied, helped by a strong earnings report from Hovnanian Enterprises and rising applications for new mortgages. Hovnanian’s CEO said he sees signs the housing industry may be entering the early stages of recovery. The Mortgage Bankers Association reported applications for mortgages rose 1.3 percent last week, largely a result of more people trying to refinance their existing loans.
Hovnanian leapt 18 percent. PulteGroup Inc. surged 7 percent and Lennar Corp. 4 percent.
U.S. markets followed major European indexes higher. Indexes rose 2.4 percent in the U.K. and France. Borrowing costs eased for Spain, another positive sign.
In other trading, the Standard & Poor’s 500 rose 29.63 points to 1,315.13. The Nasdaq composite rose 66.61 points to 2,844.72.
A Federal Reserve survey showed growth across the country. Hiring was steady, according to the Fed’s “Beige Book.” That’s in marked contrast to the government’s monthly jobs report, which said employers added the fewest jobs in a year last month.
