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Stocks surge on economic data and relief in Europe

December 1, 2010 | 11:19 am

U.S. stocks zoomed Wednesday amid another batch of upbeat economic reports and as Europe’s government-debt crisis eased.

The Dow Jones industrial average was up 243 points, or 2.2%, to 11,249 at about 11:15 a.m. PST. If it sticks by the closing bell this would be the Dow’s biggest percentage gain since Sept. 1. [Updated at 1:15 p.m.: The Dow finished with a gain of 249.76 points, or 2.3%, to 11,255.78.]

The day’s rally is more evidence that the bulls want to run with it, encouraged by more signs that the U.S. economy is picking up. Even as much of Europe was in meltdown mode in recent weeks, U.S. share prices didn’t give up much. At Tuesday’s close of 11,006 the Dow was off just 3.8% from its two-year closing high of 11,444 reached Nov. 5.

Wallstsign The broader New York Stock Exchange composite index was off 4.7% from Nov. 5 to Tuesday.

By contrast, many European markets were down much more sharply in November as the continent’s debt crisis boiled over. The Spanish market sank 14.3% last month; the Italian market slid 10.9%.

But on Wednesday European shares finally snapped back. Government bond yields across Europe plunged on speculation that the European Central Bank, which meets Thursday, will take new steps to shore up confidence in the euro zone -- perhaps by ramping-up purchases of government bonds. (Sound familiar?)

The yield on two-year Spanish bonds tumbled to 3.55% from 3.88% on Tuesday. Italian two-year bond yields slid to 2.71% from 2.98%.

Relief in the European bond market fueled relief in equity markets. The Spanish stock market jumped 4.4%, Italy was up 2.4% and German shares gained 2.7%.

Not surprisingly, the battered euro also finally is getting a lift. It's at $1.313, up from $1.301 on Tuesday.

Commodity prices also are broadly higher. Oil is up $2.66 to $86.77 a barrel, nearing the recent two-year high of $87.81 on Nov. 11.

The day’s loser: the U.S. Treasury bond market. Yields are rising, but for the right reasons --  particularly that investors are increasingly optimistic about U.S. economic growth. A report Wednesday from ADP Employer Services estimated that small businesses in November hired at the fastest pace in three years. The big number of the week comes Friday, when the government reports on overall November employment.

The 10-year T-note yield has jumped to 2.95%, up from 2.79% on Tuesday. The five-year T-note is at 1.62%, up from 1.47% on Tuesday and the highest since early August.

-- Tom Petruno

Photo credit: Gero Breloer / EPA