Stocks soared around the world Thursday after European leaders agreed on a deal to slash Greece’s debt and protect other weak countries in the region. Stronger U.S. economic growth and corporate earnings also drove commodities prices and Treasury yields higher.
Europe’s sweeping agreement, reached after an all-night summit meeting, is aimed at preventing a two-year debt crisis there from escalating into another financial crisis. Banks agreed to take 50 percent losses on the Greek bonds that they hold. Europe will also strengthen a rescue fund to protect Italy and other large European economies.
The Dow Jones industrial average surged 234 points, or 2 percent, to 12,105 in the first hour of trading. The Dow hasn’t closed above the 12,000 level since Aug. 1.
The S&P 500 rose 30, or 2.4 percent, to 1,272. The gain turned the S&P positive for the year for the first time since Aug. 3, just before the U.S. government’s debt was downgraded.
The Nasdaq composite rose 53, or 2 percent, to 2,704.
Raw materials producers, banks and stocks in other industries that depend on a strong economy for profit growth led the way. Copper jumped 5 percent to $3.66 a pound and crude oil jumped 3 percent to $93 a barrel.
Materials producers in the S&P 500 rose 3.5 percent, the most among the 10 industries that make up the index. Aluminum producer Alcoa Inc. rose 5.9 percent, the biggest gain among the 30 stocks in the Dow.
The euro rose sharply, to $1.41, as confidence in Europe’s financial system grew. The euro was worth $1.39 late Wednesday and had been as low as $1.32 on Oct. 3. European stock indexes also soared. France’s CAC-40 rose 5.3 percent and Germany’s DAX jumped 4.8 percent.
Investors sold U.S. Treasury notes and bonds, an indication they feel less need for safer investments. The yield on the 10-year Treasury note, which moves in the opposite direction of its price, rose to 2.28 percent from 2.21 percent late Wednesday.
European leaders still have to finalize the details of their latest plan. French President Nicolas Sarkozy spoke with Chinese President Hu Jintao amid hopes that countries with lots of cash like China can contribute to the European rescue.
Past attempts to contain Europe’s two-year debt crisis have proved insufficient. Greece has been surviving on rescue loans since May 2010. In July, creditors agreed to take some losses on their Greek bonds, but that wasn’t enough to fix the problem.
Worries about Europe’s debt crisis and a weak U.S. economy dragged the S&P 500 down 19.4 percent between April 29 and Oct. 3. That put it on the cusp of what’s called a bear market, which is a 20 percent decline.
Since then, there have been a number of more encouraging signs on the U.S. economy. The government reported Thursday that the economy grew at a 2.5 percent annual rate from July through September on stronger consumer spending and business investment. That was nearly double the 1.3 percent growth in the previous quarter.
Despite the jitters over Europe, many large U.S. companies have been reporting strong profit growth in the third quarter.
Dow Chemical rose 5.5 percent after its profit last quarter rose 59 percent on strong sales growth from Latin America.
Citrix Systems Inc. rose 17 percent, the most in the S&P 500 index. The technology company’s revenue rose 20 percent last quarter, and it forecast growth of up to 13 percent for 2012. Akamai Technologies Inc., whose products help speed the delivery of online content, jumped 16.8 percent after the company reported earnings that beat analysts’ expectations.
Avon Products Inc. fell 18 percent, the most in the S&P 500, after the company said the Securities and Exchange Commission is investigating its contacts with financial analysts and Avon’s own probe into bribery in China and other countries.