Dow breaks 13,000 on news from Europe
7/28/2012NEW YORK -- Faced with Facebook Inc., Starbucks Corp., and Angela Merkel, the market chose to focus on Ms. Merkel.
For a second day, the U.S. stock market powered higher after European leaders, including German chancellor Merkel, pledged to protect the union of 17 countries that use the euro. The Dow Jones industrial average blew past 13,000, a key psychological marker that it hadn't hit since early May. It climbed 187.73 points to 13,075.66. In two days, it rose 400 points.
The Standard & Poor's 500 jumped 25.95 to 1,385.97. The Nasdaq composite index rose 64.84 to 2,958.09.
Troubling signs about the economy abounded: Economic growth was anemic in the second quarter. A measure of consumer sentiment fell in July. And Facebook and Starbucks dropped sharply after reporting disappointing quarterly results.
But investors homed in on Europe. Ms. Merkel and French president Francois Hollande released a joint statement saying they were "determined to do everything to protect the euro zone." That followed a similar pledge the day before from Mario Draghi, head of the European Central Bank.
Ms. Merkel's statement was closely watched because Germany will have to sign on if any plan to keep the euro countries together is to succeed. As one of the stronger countries, Germany usually foots the bill for bailing out the weaker ones.
But a longstanding roadblock remains: Strong countries such as Germany want other European nations to agree to cut spending. Weaker countries such as Greece are resisting.
Said Michael Strauss, chief investment strategist at the Commonfund investment firm in Connecticut, "While there's some euphoria over this, at the end of the day, is Spain going to still be in a recession? Yes. Is Greece still going to be in a recession? Yes. So I wouldn't get too carried away."