May 10, 2010 in Business

Stocks surge on effort to ease Europe debt crunch

Associated Press
 

NEW YORK — Stocks rocketed higher and bond prices fell today after investors were reassured by a nearly $1 trillion plan to avoid a European debt crisis.

The Dow Jones industrial average rose about 420 points. The Dow and broader stock indexes rose more than 4 percent. Markets also barreled higher in Europe.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.57 percent from 3.43 percent late Friday. Its price fell by about a point, or $1, as demand for safe investments eased.

“The market is breathing a huge sigh of relief that the EU has taken aggressive steps to contain the EU crisis in the weaker states,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

The 16 countries that use the euro and the International Monetary Fund have agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. Markets around the world plummeted last week as fears escalated that Greece’s debt problems would spread throughout Europe and upend a global economic recovery.

Investors also feared that if Greece didn’t get a bailout, the fate of the euro, which is used by 16 countries, could be in trouble. The euro rose today against the dollar.

“Europe has unequivocally said, ‘We will defend the euro’s integrity,”’ said Oliver Pursche, executive vice president at Gary Goldberg Financial Services in Suffern, N.Y.

The U.S. Federal Reserve and other central banks also stepped up with financial support to help head off what some analysts believe could have been a broader financial crisis.

The Fed reopened a program launched in 2008 during the credit crisis under which dollars are shipped overseas through the foreign central banks. Those central banks can then lend the dollars out to banks in their home countries.

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