US Stocks Rally as European Leaders Discuss Bailout Fund Increase and Debt Crisis

Strategic Insights -

US stocks surged to close in the positive territory as the Financial Times reported that the European Union is considering doubling the size of its bailout fund. Earlier, stocks were mixed-to-lower following Standard & Poor's move to put the ratings of 15 euro-zone nations on negative watch. Despite concerns over the euro-zone's debt crisis, hopes for a solid plan to address the issue overshadowed the S&P's downgrade warning. Borrowing costs in Italy retreated from unsustainable levels, with the benchmark Treasury yield falling to 5.813% from 7.56% required by investors at Italy's last auction. Meanwhile, company news saw Netflix shares down after Verizon's potential video streaming service announcement, while Chevron shares were higher despite an expected $84 million fine for environmental damage.

Key Takeaways:

  • US stocks closed up despite initial concerns over the euro-zone's debt crisis, with the DJIA up 52.30 (+0.43%) to 12,150.13 and the S&P 500 up 1.39 (+0.11%) to 1,258.47.
  • Italy's benchmark Treasury yield fell to 5.813% from 7.56% required by investors at the country's last auction, a significant decrease in borrowing costs.
  • European leaders are discussing a coordinated budgetary process and coherent fiscal oversight to address the euro-zone's debt crisis.
  • Verizon may be planning a video streaming service to rival Netflix, sending the company's shares down.
  • Chevron could be fined $84 million by Rio de Janeiro for environmental damage due to the oil spill at the company's Frade project.
  • Darden Restaurants warned on its upcoming quarter, expecting to report fiscal Q2 EPS of $0.41, below the Thomson Reuters mean analyst estimate of $0.54.
  • Apple is being investigated by European Union antitrust regulators over deals that may restrict e-book sales across the region.
  • Merck & Co. will establish a new Asian research and development headquarters in Beijing and commit $1.5 billion to conduct R&D in China over the next five years.
  • Tesco PLC has lost market share to rivals after launching a price-cutting campaign in October, according to data from researcher Kantar Worldpanel.
  • Peregrine Pharmaceuticals reported preliminary results from a randomized Phase II trial showing a 50% improvement in overall tumor response rates in non-small cell lung cancer patients.

Statistics:

  • DJIA: +0.43% to 12,150.13
  • S&P 500: +0.11% to 1,258.47
  • Netflix shares: down due to potential competition from Verizon's video streaming service
  • Chevron fine: $84 million for environmental damage
  • Darden Restaurants Q2 EPS: $0.41 (below analyst estimate of $0.54)
  • Merck & Co. R&D commitment: $1.5 billion over five years
  • Tesco PLC market share: 30.5% (down from 30.7% last year)
  • Peregrine Pharmaceuticals trial results: 50% improvement in overall tumor response rates

Sources:

  • "European leaders discuss bailout fund increase and debt crisis" - Financial Times
  • "S&P puts ratings of 15 euro-zone nations on negative watch" - Standard & Poor's
  • "Italy's Treasury yield falls to 5.813% from 7.56% required by investors" - Reuters
  • "Verizon may plan video streaming service to rival Netflix" - Reuters
  • "Chevron could face $84 million fine for environmental damage" - Bloomberg
  • "Darden Restaurants warns on upcoming quarter" - Reuters
  • "Apple investigated by EU antitrust regulators over e-book sales" - Bloomberg
  • "Merck & Co. to establish Asian research and development headquarters in Beijing" - Reuters
  • "Tesco PLC loses market share after price-cutting campaign" - Kantar Worldpanel
  • "Peregrine Pharmaceuticals reports positive trial results for non-small cell lung cancer treatment" - Peregrine Pharmaceuticals press release