Stocks Surge as European Leaders Reassure Investors of Greece's Eurozone Membership

Strategic Insights -

As European leaders calmed jittery investors by insisting that Greece would remain a eurozone member and achieve its fiscal targets, the stock market witnessed a significant rally on Wednesday afternoon. The Dow Jones industrial average shot up 183 points, or 1.7%, with broad gains across the board. The S&P 500 added 19 points, or 1.6%, and the Nasdaq composite rose 42 points, or 1.7%. Following a telephone conference call with Greek Prime Minister George Papandreou, French President Nicolas Sarkozy, and German Chancellor Angela Merkel, a statement from Merkel's office emphasized that Greece's future lies in the eurozone.

Key Takeaways:

  • The stock rally gained momentum after European leaders reassured investors that Greece would remain a eurozone member and achieve its fiscal targets.
  • The Dow Jones industrial average shot up 183 points, or 1.7%, with broad gains across the board.
  • The S&P 500 added 19 points, or 1.6%, and the Nasdaq composite rose 42 points, or 1.7%.
  • A false alarm out of Europe regarding the Austrian parliament committee's vote on the expansion of Europe's stability fund spooked investors but ultimately had no significant impact.
  • Moody's downgraded French banks Credit Agricole and Societe Generale, but the downgrade was not as bad as some had feared.
  • Investors were heartened by talks of a new common eurozone bond, which has been discussed as a possible solution to ease borrowing costs for weaker euro area nations.
  • U.S. stocks managed to log late-day gains after French banks BNP Paribas and Societe General debunked rumors of funding troubles.
  • The Producer Price Index (PPI) was unchanged in August, with the core PPI ticking up 0.1%.
  • Retail sales were flat in August, despite expectations of a 0.2% rise.
  • Business inventories rose 0.4% in July, short of economists' expectations for a 0.5% increase.

Statistics:

  • Dow Jones industrial average gained 183 points, or 1.7%, on Wednesday afternoon.
  • S&P 500 added 19 points, or 1.6%, with the Nasdaq composite rising 42 points, or 1.7%.
  • The Producer Price Index (PPI) was unchanged in August.
  • The core PPI ticked up 0.1%.
  • Retail sales were flat in August.
  • Business inventories rose 0.4% in July.

Sources:

  • NEW YORK (CNNMoney)
  • German Chancellor Angela Merkel's office statement
  • Greek Prime Minister George Papandreou's reaffirmation of Greece's commitment to fiscal goals
  • Moody's downgrade of French banks Credit Agricole and Societe Generale
  • European Commission proposal for a new common eurozone bond
  • Wells Fargo Advisors' chief technical market strategist Scott Marcouiller
  • Austrian finance ministry spokesperson