New York: US stocks rallied for a second day on Thursday as Greece backed away from a proposed referendum that threatened its membership in the euro, which could destabilize global markets.
News out of Europe has kept investors on pins and needles for months. Investors are worried a possible default by Greece could trigger another financial crisis that could spread beyond Europe.
The European Central Bank provided a happy surprise early to investors with an interest rate cut, a sign of a more aggressive approach to confront weak growth in the region.
Greek Prime Minister George Papandreou backed away from his referendum proposal that could have derailed last week’s long-awaited agreement to cut Greek debt and shore up European banks.
“There’s just this extraordinary focus on Greece, the fast money in the market is interpreting the news out of Europe ... and they’re saying this is good, this is bad,” said Eric Kuby, chief investment officer at North Star Investment Management Corp. in Chicago.
“A month or two ago people thought there was going to be a bigger crisis, more contagion. It’s not happened, so people are trying to get more invested in equities, putting the risk trade back on.”
Stocks associated with growth led, with energy the best-performing sector on Thursday. Equity performance has been highly correlated with the euro, which gathered steam throughout the day on supportive headlines from Europe.
The S&P energy index rose 2.5%, while the technology index gained 2.4 %.
The Dow Jones industrial average was up 208.43 points, or 1.76%, at 12,044.47. The Standard & Poor’s 500 Index was up 23.25 points, or 1.88%, at 1,261.15. The Nasdaq Composite Index was up 57.99 points, or 2.20%, at 2,697.97.
Shares of mobile phone chip maker Qualcomm, up 7.5%t to $56.11, helped support the Nasdaq a day after the company forecast sales above forecasts.
The focus on Friday should shift more to the United States when the Labor Department releases October’s non-farm jobs report. Economists polled by Reuters forecast the economy added 95,000 payroll jobs in October.
Data on Thursday showed fewer Americans filed new claims for jobless benefits last week, a sign the US economy’s growth is steady.
“What you are seeing is reasonably good economic numbers from the US, so you’re not seeing anything that’s in a negative way changing the focus,” Kuby said.
Solid US earnings, too, have provided a lot of underlying support for the market in recent weeks, he said.
After the close, shares of Starbucks rose 2.4% to $42.40 as it reported results.
About 8.38 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, in line with last year’s daily average of 8.47 billion.
Advancing stocks beat declining ones on the NYSE by about 4 to 1 and on the Nasdaq by about 3 to 1.