NEW YORK (AP) — Stocks rocketed to their biggest gain in a year and bond prices fell Monday after a nearly $1 trillion plan to contain Europe's debt crisis reassured investors.
The Dow Jones industrial average rose about 405 points to its biggest advance since March 2009. Broader U.S. indexes outpaced the Dow's 3.9 percent rise. Gains in several European markets topped 9 percent.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.55 percent from 3.43 percent late Friday. The drop in demand for safety holdings like Treasurys signaled that investors are less afraid that Europe's debt problems will spoil a global recovery.
The European Union and the International Monetary Fund agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. The scope of the plan was greater than many analysts had expected and eased fears that leaders wouldn't be able to suppress the crisis.
"The market is breathing a huge sigh of relief that the EU has taken aggressive steps," said Alan Gayle, senior investment strategist at RidgeWorth Investments in Richmond, Va.
Investors drew reassurance after the Federal Reserve and other central banks stepped up with financial support to corral what analysts warned was a growing financial crisis.
The Fed restarted a program from 2008 to ship dollars overseas through the foreign central banks. Those central banks can then lend the dollars out to banks in their home countries. The Bank of England, the European Central Bank, the Bank of Canada, the Swiss National Bank and the Bank of Japan are also involved in the dollar-swap effort.
The advance in U.S. stocks was broad. Bank of America Corp., Caterpillar Inc. and General Electric Co. led the Dow with gains of more than 6 percent.
Markets around the world plummeted last week after fears grew that Greece's debt problems would spread to other struggling European economies like Spain, Portugal and Italy. The Dow slid 5.7 percent last week in its worst drop since the depths of the financial crisis in October 2008. On Thursday alone, the Dow was down nearly 1,000 points late in the day before recovering much of its losses.
Triple-digit Dow moves have again become the norm. The fluctuations are reminders of those that came during the credit crisis in late 2008 and the stock market bottom in early 2009.
According to preliminary calculations, the Dow rose 404.71, or 3.9 percent, to 10,785.14. At its peak, the Dow was up nearly 455 points. The climb came after four straight days of losses and was the biggest advance since March 2009, when the market was bouncing off its lowest levels in 12 years.
The Standard & Poor's 500 index rose 48.85, or 4.4 percent, to 1,159.73. The Nasdaq composite index rose 109.03, or 4.8 percent, to 2,374.67.
For much of 2010, major stock indexes had been climbing steadily on signs the U.S. economy was recovering. Last week's plunge had erased the market's gains for the year, but the jump on Monday put major indices back in the black for 2010.
Investors had feared that the euro, which is used by 16 countries, would continue to slide if Greece didn't get more help.
"Europe has unequivocally said, 'We will defend the euro's integrity,'" said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y.
A drop in the dollar boosted prices of commodities, which become more attractive to buyers outside the U.S. when the dollar is weak.
The Chicago Board Options Exchange's Volatility Index fell after spiking last week. The index, which is known as the market's fear gauge, last week jumped to about 41 from 20. That meant more investors were expecting big drops in the market. The VIX slid 30 percent Monday to about 29.
Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, said the market's bounce reflects short-covering. That occurs when investors are forced to buy stock after having earlier sold borrowed shares in a bet that the market would fall. That rush to cover ill-timed bets can hasten the market's climb.
"You don't solve the problem of debt by printing new money," Smith said. "Whatever euphoric action we're seeing, there is going to be a need for EU banks to raise more capital."
As investors jump back into riskier assets like stocks on Monday, U.S. bond prices tumbled. The price of the 10-year note fell by about a point, or $1 per $100.
Gold also fell, losing $9.60 to $1,200.80 an ounce. Treasurys and gold surged late last week as investors piled into safe assets.
Crude oil rose $1.69 to $76.80 per barrel on the New York Mercantile Exchange.
Bank of America rose $1.12, or 6.9 percent, to $17.30, while Caterpillar rose $4.59, or 7.4 percent, to $66.69. GE rose $1.16, or 6.9 percent, to $18.04.
At the New York Stock Exchange, 2,992 shares rose while only 158 fell. Trading volume came to 1.9 billion shares compared with 2.4 billion Friday.
Britain's FTSE 100 rose 5.2 percent, Germany's DAX index rose 5.3 percent, and France's CAC-40 climbed 9.7 percent. In Greece, the main stock index rose 9.1 percent. Portugal's PSI 20 rose 10.7 percent. In Asia, Japan's Nikkei stock average rose 1.6 percent.
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AP Business Writer Consella A. Lee contributed reporting.
Copyright 2010 The Associated Press.
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THIS IS A BREAKING NEWS UPDATE: Read earlier version below.
NEW YORK (AP) — Stocks rocketed higher Monday after European leaders agreed to a nearly $1 trillion rescue plan to avoid a major debt crisis and the U.S. Federal Reserve said it would also provide loans overseas.
The Dow Jones industrial average rose about 400 points. The Dow and broader stock indexes rose more than 3 percent. Markets also barreled higher in Europe.
Interest rates rose in the bond market after demand for Treasurys fell.
The 16 countries that use the euro and the International Monetary Fund have agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. Markets around the world plummeted last week as fears escalated that Greece's debt problems would spread throughout Europe and upend a global economic recovery.
Investors also feared that if Greece didn't get a bailout, the fate of the euro, which is used by 16 countries, could be in trouble. The euro rose Monday against the dollar.
"Europe has unequivocally said, 'We will defend the euro's integrity,'" said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y.
Pursche noted the actions taken don't mean European leaders will ensure its current value, but that they will do what is necessary to ensure its existence.
The U.S. Federal Reserve and other central banks also stepped up with financial support to help head off what some analysts believe could have been a broader financial crisis.
The Fed reopened a program launched in 2008 during the credit crisis under which dollars are shipped overseas through the foreign central banks. Those central banks can then lend the dollars out to banks in their home countries.
Aside from the Fed, other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan are also involved in the dollar swap effort.
In midmorning trading, the Dow rose 397.45, or 3.8 percent, to 10,777.88. The Standard & Poor's 500 index rose 46.85, or 4.2 percent, to 1,157.73. The Nasdaq composite index rose 104.20, or 4.6 percent, to 2,369.84.
Stocks were incredibly volatile at the end of last week as investors shrugged off signs of an improving U.S. economy and focused on European sovereign debt problems. The Dow fell 5.7 percent last week to erase its gains for the year, while broader indexes fell even further. On Thursday alone, the Dow was down nearly 1,000 points late in the day before recovering some of those losses.
Stocks have dropped four straight days as triple-digit Dow moves have again become the norm. As the credit crisis grew in late 2008 and the market bottomed in early 2009, big swings were normal.
In recent months, however, the Dow had been climbing slowly and steadily in recent months on repeated signs the economy was recovering.
"Volatility will remain in the marketplace," Pursche said. He noted the lack of turbulence in previous months was abnormal and that problems still remain. Some European countries still need to enact austerity measures and unemployment remains high in the U.S., Pursche said.
"A 1 percent to 2 percent market move ... in either direction is something investors should be prepared to cope with," Pursche added.
As investors jump back into riskier assets like stocks on Monday, U.S. bond prices tumbled. Gold also fell sharply. Both surged late last week as investors sought safe-haven investments.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.58 percent from 3.43 percent late Friday.
Gold fell $14.90 to $1,195.50 an ounce. Crude oil rose $2.47 to $77.58 per barrel on the New York Mercantile Exchange.
At the New York Stock Exchange, 2,923 stocks rose while only 75 fell. Trading volume came to 275 million shares compared with 230.8 million traded at the same point Friday.
In afternoon trading, Britain's FTSE 100 rose 4.5 percent, Germany's DAX index surged 5 percent, and France's CAC-40 rallied 8.2 percent. Earlier, Japan's Nikkei stock average rose 1.6 percent.
Copyright 2010 The Associated Press.
