Stocks moved sharply higher during trading on Friday, extending the strong upward move seen late in the previous session. Much of the strength on Wall Street stemmed from a positive reaction to the latest developments in Europe.
The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow jumped 277.83 points or 2.2 percent to 12,880.09, the Nasdaq soared 85.56 points or 3 percent to 2,935.05 and the S&P 500 surged up 33.12 points or 2.5 percent to 1,362.16.
With the strong gains on the day, the major averages all moved higher for the week. The Nasdaq rose by 1.5 percent, while Dow and the S&P 500 jumped 1.9 percent and 2 percent, respectively.
The rally on Wall Street came after European Council President Herman Van Rompuy announced that European leaders have agreed to spend 120 billion euros on a package of measures to stimulate growth and create jobs.
Van Rompuy said the leaders also agreed to permit the European Financial Stability Facility and the European Stability Mechanism to directly recapitalize ailing banks after a single European banking regulator is commissioned.
Additionally, the leaders agreed that ESM loans to Spanish banks will not have senior creditor status. The European Central bank is set to act as an agent for the rescue funds in market operations.
Peter Boockvar, managing director at Miller Tabak, said, "The next question is whether the ESM/EFSF will have enough capital and assuming they don't, will the ECB chip in by giving it a bank license thus leveraging its size. That is yet to be determined."
"For now, party on and turn that hour glass over as more time has been bought but only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains," he added.
Meanwhile, traders largely shrugged off a mixed batch of U.S. economic data, including a report from Thomson Reuters and the University of Michigan showing that consumer sentiment deteriorated by even more than previously estimated in the month of June.
The report showed that the consumer sentiment index for June was downwardly revised to 73.2 from the mid-month reading of 74.1. With the downward revision, the consumer sentiment index is down sharply compared to the nearly five-year high of 79.3 seen in May.
A separate report from the Institute for Supply Management - Chicago showed that Chicago-area business activity saw a modest acceleration in the pace of growth in the month of June, with the Chicago business barometer inching up to 52.9 in June from 52.7 in May
Despite the strong upward moved by the broader markets, Research in Motion (RIMM) fell sharply after the BlackBerry maker reported weaker than expected first quarter results and provided disappointing guidance. Shares of RIM tumbled by 19.1 percent.
In overseas trading, stock markets across the Asia-Pacific region showed strong moves to the upside during trading on Friday. Japan's Nikkei 225 Index advanced by 1.5 percent, while Hong Kong's Hang Seng Index surged up by 2.2 percent.
The major European markets also moved sharply higher on the day. The U.K.'s FTSE 100 Index jumped 1.4 percent, while the German DAX Index and the French CAC 40 Index soared 4.3 percent and 4.8 percent, respectively.
In the bond market, treasuries came under considerable pressure following the news out of Europe. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.2 basis points to 1.659 percent.
While most of the major sectors showed strong moves to the upside, steel stocks posted particularly strong gains on the day amid optimism about the outlook for demand. Reflecting the strength in the steel sector, the NYSE Arca Steel Index surged up by 4.9 percent.
Considerable strength was also visible among computer hardware stocks, as reflected by the 4.7 percent gain posted by the NYSE Arca Computer Hardware Index. EMC Corp. (EMC) and NetApp (NTAP) turned in two of the sector's best performances.
Semiconductor, networking and software stocks also posted substantial gains amid strength throughout the tech sector.
Housing, oil service, defense, and gold stocks also saw significant strength on the day, reflecting the broad based buying interest on Wall Street.
While trading activity may be somewhat subdued next week due to the Independence Day holiday, investors are likely to keep a close eye on the monthly employment report on Friday.
In the days leading up to the jobs report, trading could be impacted by the release of reports on manufacturing activity, construction spending, and factory orders.
by RTT Staff Writer
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