Stocks surged on Thursday, after European leaders concluded an overnight debt-crisis summit with an agreement that promises to address some of the thorniest issues related to Greek bond holders and the size of the region’s bailout fund, easing concerns that the crisis could spill out of control.
The Dow Jones industrial average closed at 12,208.55, up 339.51 points, or 2.9 per cent – bringing the blue-chip index to a three-month high and breaking through its 200-day moving average.
The broader S&P 500 closed at 1,284.59, up 42.59 points, or 3.4 per cent. The gain was its biggest one-day move since August and puts the index into positive territory for the year, for the first time since late July. In Canada, the S&P/TSX composite index closed at 12,465.44, up 279.38 points, or 2.3 per cent.
The gains were widespread, lifting all 10 subindexes within the S&P 500 and the TSX, but heavily favoured those that have a greater sensitivity to the economy. U.S. financials were particularly hot, with Morgan Stanley rising 17.7 per cent and Bank of America Corp. rising 9.6 per cent.
Among Canadian stocks, Manulife Financial Corp. rose 7.1 per cent, Suncor Energy Inc. rose 4.9 per cent and Teck Resources Ltd. rose 8.1 per cent.
The gains weren’t limited to North America, either. The U.K.’s FTSE 100 rose 2.9 per cent and Germany’s DAX index rose 5.4 per cent. And among commodities, crude oil rose to $93.96 (U.S.) a barrel, up $3.76 and close to a three-month high.
The Commerce Department reported that the U.S. economy expanded at an annualized rate of 2.5 per cent in the third quarter, fending off the threat of a recession for the time being.
However, it was the deal in Europe that attracted the most attention. The agreement itself was short on detail and raised some perplexing questions about the role of China in expanding the bailout fund and whether asking Greek bondholders to take a “voluntary” 50 per cent haircut on their holdings could work without triggering default mechanisms. Still, it appeared as though any agreement was good enough to lift the mood among investors, that politicians and authorities were at last dealing with the biggest economic threat of the year.
Plunging U.S. bond prices underlined the shift, sending bond yields higher. The yield on the 10-year U.S. Treasury bond bounced to 2.38 per cent from 2.21 per cent – its biggest one-day gain since mid-August. (As bond prices fall, yields rise.)
Gold, seen as a haven investment earlier in the week when stocks fell, moved with the stock market this time, rising to $1,747.70 an ounce, up $24.20.
