Stocks rally as European worries ease and Fed sees 'moderate' U.S. growth
U.S. stock indexes rose to new multi-year highs on Wednesday as Europe’s government-debt crisis eased and the Federal Reserve said the domestic economy “continued to expand moderately” at the end of 2010.
The bulls still seem to be in control on Wall Street, even after the hefty gains of the last four months.
The Dow Jones industrial average added 83.56 points, or 0.7%, to 11,755.44, its highest closing level since Aug. 11, 2008. The blue-chip index is up 1.5% year-to-date after rising 11% last year.
The market got a boost early in the day after Portugal saw decent demand for its offering of four- and 10-year bonds -- the first long-term debt sale of the year among financially distressed euro-zone countries. That allayed worries that Portugal would have to quickly join Greece and Ireland in seeking a bailout from the European Union.
European stocks surged. Spain’s main market index rocketed 5.4%, the French market rallied 2.2% and Portugal gained 2.5%. The battered euro jumped to $1.313 from $1.297 on Tuesday.
U.S. stocks were underpinned by the Fed’s latest “beige book” report on the economy, covering late November and December. The report, which is compiled based on reports from the Fed’s 12 districts, said that “most districts indicated that business contacts were positive about the outlook, although still generally cautious.”
In the U.S. bond market the Treasury saw strong demand for its sale of $21 billion in 10-year notes. The notes were sold at a yield of 3.39%. That was the highest auction yield for a 10-year security since May -- reflecting the rebound in long-term interest rates in the last few months -- but was below the 3.41% yield estimated by bond traders in a Bloomberg News survey.
Finally, money also flooded back into commodity markets Wednesday after last week's bout of profit-taking. The Reuters/Jefferies CRB index of 19 major commodities rose 1% to 334.88, its highest close since Oct. 1, 2008. The index got a boost as grain prices surged after the U.S. goverment reduced its estimates of corn and soybean supplies.
Crude oil futures also rose, ending the day at a two-year high, up 75 cents to $91.86 a barrel.
-- Tom Petruno