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Stocks close higher as Europe nears budget pact
NEW YORK — A deal to forge stronger ties between most of Europe’s economies sent stocks sharply higher Friday as hopes grew that the region is close to resolving its debt crisis. The Dow Jones industrial average rose 186 points. All 17 nations that use the euro agreed to sign a treaty that allows a central European authority closer oversight of their budgets. Nine other EU nations are considering it. Britain is the lone holdout. The agreement came after marathon overnight talks among European leaders at a two-day summit in Brussels. A deal on tighter fiscal control is considered a crucial step before the European Central Bank will consider committing more money to lower borrowing costs of heavily indebted countries like Italy and Spain by buying their bonds.
Ryan Detrick, senior technical strategist with Schaffer’s Investment Research, cautioned that investors have been disappointed by Europe’s previous efforts to contain its debt crisis. The market will likely remain volatile in the coming weeks, Detrick said, because the Europe plan is “only a minor step” toward a solution. “We’ve seen these agreements before, and they can just as easily deteriorate,” Detrick said. The Dow closed up 186.56 points, or 1.6 per cent, at 12,184.26. It’s up 1.4 per cent for the week. Bank stocks led the market higher, reflecting traders’ optimism about Europe’s progress toward solving its crisis. Citigroup Inc. rose 3.7 per cent, Morgan Stanley 3.2 per cent and JPMorgan Chase & Co. 3 per cent.
Banks have been weighed down for months by fears about their exposure to Europe. The biggest European banks have been downgraded. If Europe’s crisis spins out of control, US banks that do business with them would also suffer. The Standard & Poor’s 500 index closed up 20.84 points, or 1.7 per cent, at 1,255.19. The Nasdaq composite index finished up 50.47, or 1.9 per cent, at 2,646.85. The S&P is up 0.9 per cent for the week, the Nasdaq 0.8 per cent.
The gains were broad. DuPont was the only stock among the 30 in the Dow average to fall. The chemical and materials company slid 3.2 per cent after saying it expects earnings this year will fall well short of Wall Street’s forecasts because of weak demand for electronics and industrial supplies. It was the second consecutive week of gains for all three indexes. Stocks were pummeled two weeks ago as borrowing costs soared for European nations such as Italy. They recovered last week after the world’s major central banks announced a program to give commercial banks easier, cheaper access to loans in US dollars.
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