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European rescue plan sends stocks up

October 27, 2011 |  8:04 am

Bull -- spencer platt getty
Stocks shot up Thursday morning after European leaders unveiled a financial rescue plan and the U.S. announced that the economy grew at a faster clip in the third quarter.

The gains brought the broad Standard & Poor's 500 index into the black for the year, after rising 2.0%, or 24.20 points, to 1266.20 in early trading. The Dow Jones industrial average, which was already in positive territory for the year, rose 1.8%, or 216.00 points, to 12085.04.

European leaders announced that private holders of Greek debt agreed to take a 50% writedown on the bonds. In exchange, other European countries will take several measures to stabilize the continent's financial system. Fears about the European economy have driven investors to the sidelines in recent months.

Leading indexes were up 5.2% in France and 4.7% in Germany.

Just before U.S. markets opened Thursday, the Commerce Department said the U.S. economy grew at a 2.5% annual rate from July to September, up from a 1.3% growth rate in the previous quarter. The data calms recent fears that the United States is heading back into recession.

While investors cheered the news, economists warned that the European debt plan may provide only temporary relief, and that the U.S. economy may still be in for a period of slower growth.

Paul Ashworth, an economist at Capital Economics, wrote Thursday that the U.S. data "would
seem to make a mockery of fears that emerged early in the quarter that the economy was entering a recession. Nevertheless, we still expect growth to slow again over the next couple of quarters."

RELATED:

EU announces new steps to tackle debt crisis

Will Europe's rescue plan work? Watch the bond market

Economy grows at 2.5% in third quarter, easing recession fears

-- Nathaniel Popper

Photo: Spencer Platt / Getty Images

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