U.S. stocks advance on speculation European leaders will act

U.S. stocks advanced Monday, giving the Dow Jones industrial average its biggest increase in a month, amid speculation that European policymakers will act to prevent the region’s debt crisis from getting worse.

Bank of America and J.P. Morgan Chase rose more than 4.5 percent as the European Central Bank was said to consider restarting covered-bond purchases along with further measures to ease monetary conditions. Berkshire Hathaway Class B shares added 8.6 percent as the company plans a stock buyback.

Loading...

Comments

• Weigh In
• Corrections?

Personal Post

Gallery

 Here are the five biggest single-day gains and losses in the Dow Jones industrial average’s history, according to the Wall Street Journal.

Gallery

 European leaders are at a crossroads: They must pull closer together or risk the euro currency project falling apart.

The Standard & Poor’s 500-stock index rose 2.3 percent, to 1162.95, after falling as much as 0.5 percent earlier. All 10 groups in the gauge advanced. The Dow climbed 272.38 points, or 2.5 percent, to 11,043.86.

Asian markets also rallied in early trading Tuesday. Japan’s Nikkei 225 index ended its morning session up 1.8 percent.

“You had some quasi-positive comments out of Europe,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock. “The situation in Europe is a near-term risk, but if
the global economy muddles through, you’ll probably have room for a rally in stocks.”

The S&P 500 is down 12 percent since June 30 and headed for the biggest quarterly slump since 2008 on concern about a global economic slowdown. Last week’s rout erased $1 trillion from U.S. equities amid concern that Greek insolvency is inevitable and Europe can’t contain the damage.

ECB policymakers are likely to debate next week restarting their covered-bond purchases along with further measures to ease monetary conditions, a euro-region central bank official said.

The reintroduction of 12-month loans to banks also will be discussed at the ECB’s Oct. 6 policy meeting, said the person, who spoke on the condition of anonymity because the information is confidential. Interest-rate cuts are likely to be discussed, though they are not on the agenda, the official said. A spokesman for the Frankfurt-based ECB declined to comment.

Stocks briefly pared gains earlier after German Finance Minister Wolfgang Schaeuble said euro-region governments have no intention of raising the European Financial Stability Facility’s volume above $600 billion. Equities rebounded after ECB Governing Council member Ewald Nowotny said there may be “good reason” to reintroduce loans with a maturity of more than six months.

“When you look at Europe, the solutions are not going to be implemented anytime soon,” Stephen Wood, chief market strategist for Russell Investments, said in a telephone interview. “That means the market volatility is going to continue.”

— Bloomberg News