Dow erases loss for 2011 as stocks continue to rebound
The 30-stock Dow was up 174 points, or 1.5%, to 11,590 at about 11:05 a.m. PDT Wednesday, for a year-to-date gain of 0.1%. The last time the index was in the black for the year was on Aug. 31.
Once again, stocks are up worldwide on hopes that European policymakers finally are serious about ring-fencing their debt crisis. European Commission President Jose Manuel Barroso proposed guidelines for recapitalizing the continent’s banks, a move seen as critical ahead of whatever losses lenders are forced to absorb on their holdings of Greek government bonds.
Major European stock market indexes rose 2% to 3% for the day. The German market now has risen for six straight sessions, for a total gain of 15% in that period.
On Wall Street, investors and traders have been shifting back to stocks since the market hit new lows for the year Oct. 3. Optimism about Europe has helped, as have economic data that suggest the U.S. isn’t in danger of falling back into recession.
The Standard & Poor’s 500 index was up 1.7% to 1,216 just after 11 a.m. PDT, though still down 3.3% on the year. The S&P has jumped 10.7% from its 52-week low of 1,099 on Oct. 3 -- when the index was on the cusp of falling into a bear market, meaning a decline of 20% from the spring highs.
Stocks are rebounding in part as traders remove bearish bets they had put on in September, when markets were careening lower for a fifth straight month. “Short sellers” who borrow stock and sell it, betting on further price declines, face heavy losses as the market rebounds. They must buy new shares to replace what they borrowed, a move that helps stoke any rally already in progress.
As usual, the market is doing its best to frustrate everyone -- bears who thought that Armageddon was nigh, and bulls who believed the pessimism was overdone but were reluctant to step up and buy because they expected shares to remain depressed indefinitely.
-- Tom Petruno
Photo: Traders on the New York Stock Exchange on Wednesday. Credit: Richard Drew / Associated Press