(AP:NEW YORK) Stocks soared in the U.S. and Europe Thursday after the European Central Bank president vowed to "do whatever it takes" to preserve the continent's monetary union.
The Dow Jones industrial average soared 234 points to 12,913 in the first hour of trading, following European markets sharply higher. Benchmark indexes in Spain and Italy each jumped 5 percent. France's stock market surged 3 percent.
The comments from Mario Draghi at an investor conference at the Olympics raised hopes that Europe's central bank might intervene in markets to bring down the cripplingly high borrowing costs for struggling European countries like Spain and Italy.
After insisting for months that it was up to governments to restore confidence in the euro, Draghi's pledged that "The ECB is ready to do whatever it takes to preserve the euro."
In other signs that investors were becoming more confident that Europe's financial crisis would not spin out of control, the euro surged against the dollar and the yield on the 10-year Treasury note rose. Borrowing costs for Spain and Italy fell sharply.
In other U.S. trading, the Standard & Poor's 500 index rose 23 points to 1,361 and the Nasdaq composite index rose 43 points to 2,897, despite more disappointing news from technology companies including the online game maker Zynga.
Several U.S. companies were also rising sharply after reporting stronger earnings. Sprint Nextel jumped 48 cents, or 14 percent, to $3.84. The country's third-largest wireless carrier was successful in convincing smartphone subscribers to pay up for "unlimited data" service, and its service revenue zoomed higher, beating analysts' estimates.
The gains in the U.S. stock market were broad. All 10 of the industry groups in the S&P 500 index rose, led by telecommunications companies.
In Europe, Draghi's comments came after days of uncertainty in Europe and rising concern over Spain's recession and banking industry, which is reeling following the implosion of a real estate bubble. As borrowing costs for both Spain and Italy rose in the past week, investors feared that both countries might need to be rescued, as Greece, Portugal and Ireland have been. .
The borrowing costs for Spain's government plunged following Draghi's comments as investors anticipated that the European Central Bank might step up its purchases of Spanish government bonds.
The yield on Spain's benchmark 10-year bond dropped almost half a percentage point, an enormous move, to 6.93 percent. That rate surged as high as 7.54 percent this week as investors dumped the country's bonds and lost confidence in Spain's ability to manage its debts.
Technology companies continued to report disappointing earnings following industry leader Apple's rare earnings disappointment earlier this week.
Zynga Inc., which produces popular social network games "CityVille" and "FarmVille" posted poor quarterly results and cut its outlook, prompting a number of analyst downgrades. Its stock fell $2.04, or 40 percent, to $3.03.
The news also dragged down shares of Facebook, which got about 12 percent of its 2011 revenue from Zynga. The poor results may hurt Facebook's second-quarter revenue when it reports its own quarterly results later Thursday. Facebook fell $1.74, or 6 percent, to $27.61.
Dow Chemical fell 78 cents, or 2.5 percent, to $29.58. The country's largest chemical maker, said it could accelerate cost-cutting efforts after its second-quarter net income fell 34 percent.
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Draghi is really pressing Germany's Merkel. That's where the credit really exists. Merkel, within months, is going to either cave and shoot her Party for the next ten years; or, say no and exit the Euro. That's right, there's one dynamic Capitalistic economy amid Partially or totally Socialistic Countries with far too many Government employees as a percentage of population and excesses in social payments to pensions that would break Saudi Arabia. Merkel must choose to be bled slowly to retain inexpensive exports because of the Euro or go back to the more powerful D-Mark. That's the only real story. Except, do we really know how much Sovereign Euro Debt our Wall St. Banks are carrying in the form of Derivative strips, CDS's, CS's and other securities. It could be bad!
Mario Draghi is from Goldman Sachs, so that brings some question to the validity of his statement.
I don't give a crap what Draghi says it is not going to work. It's a nice gesture though. One gap filled and looking for the second and little higher gap to be filled in the DOW and S&P's then it looks like more downside. Gonna follow the red triangles sometime next week.
I bought SPY puts today near the open and am still ahead on the trade. I stuck with them in the event we don't go any higher, or even gap lower tomorrow. I am kicking myself for taking profits on FB puts today prior to the earnings announcement though. I think it may be a $15 stock. Good luck
Hey JP,
I am guessing 137.86 for the high on the SPY today.
On top of this announcement, earnings are coming out and pushing some stocks higher. I looked at Sprint this morning.
I went through one year and back tested MarketClub’s Trade Triangle signals for NYSE_S (Sprint) as an intermediate term trader. I used the method of using Monthly Trade Triangles to determine trade direction and entry and then used the non corresponding Weekly Trade Triangles to signal the exit of a trade. In the past year (since 7/28/11) the Trade Triangles have suggested 4 trades, 3 of which were profitable and pocketed a return of approx. 58%.
Here’s what I saw:
07/28/11 RED Monthly TT Short @ 4.54
08/31/11 GREEN Weekly TT Out @ 3.79
+0.75
09/22/11 RED Weekly TT Short @ 3.24
02/06/12 GREEN Weekly TT Out @ 2.36
+0.88
03/09/12 GREEN Monthy TT Long @ 2.85
04/09/12 RED Weekly TT Out @ 2.66
-0.19
5/25/12 GREEN Weekly TT Long @ 2.66
7/26/12 Current price if you were to sell @ 3.83
+1.21
Total = +2.65
+58.4%