Stocks rebounded modestly on Wednesday, recovering some of the ground lost during a three-day slump that was punctuated by Tuesday’s sharp dip.
The Dow Jones industrial average closed at 12,837.33, up 78.18 points or 0.6 per cent. The blue-chip index fell more than 200 points on Tuesday, for its worst decline this year. The broader S&P 500 closed at 1352.63, up 9.27 points or 0.7 per cent. In Canada, the S&P/TSX composite index closed at 12,350.16, up 51.53 points or 0.4 per cent.
The U.S. gains were led by financials, industrials and consumer discretionary stocks. In Canada, energy stocks showed some strength, but materials were mixed and financials slumped again.
The moves follow rising confidence that the Greek debt swap is going okay, with private bondholders apparently on board to turn in their existing government bonds and take more than a 50 per cent haircut – and avoid a disorderly default that would throw the euro zone back into crisis mode.
As well, the Federal Reserve leaked to the Wall Street Journal that it was putting a third stimulus option on the table: It could buy long-term Treasury bonds and borrow the money back for a short period. It’s a move known as “sterilized” bond buying and attempts to hold down long-term borrowing costs without introducing the threat of inflation.
The news follows some disappointment from last week, when Fed chairman Ben Bernanke made no mention in his Congressional testimony of using additional stimulus measures. And while the Fed made no mention on Wednesday of resorting to sterilized bond buying, investors apparently like to see the option.
Among U.S. financials, Bank of America Corp. rose 4 per cent and JPMorgan Chase & Co. rose 1.6 per cent. Caterpillar Inc. and Home Depot Inc. rose 2.2 per cent each.
Apple Inc. rose 0.1 per cent, recovering from an afternoon decline after the company unveiled its latest iPad tablet computer, conforming to most expectations.
Among Canadian energy stocks, Suncor Energy Inc. rose 1.2 per cent and Canadian Oil Sands Ltd. rose 0.2 per cent after the price of crude oil rose to $106.16 (U.S.) a barrel, up $1.46. However, some of the big gold producers failed to follow gold: Barrick Gold Corp. fell 0.1 per cent and Goldcorp Inc. fell 0.6 per cent even as gold rose to $1,683.90 an ounce, up $11.80.
Bank of Nova Scotia fell 0.6 per cent, a day after beating estimates with its quarterly results and raising its dividend. Laurentian Bank of Canada fell 0.7 per cent after reporting that its quarterly earnings fell 16 per cent from last year.