U.S. stocks surged on Friday, with the Dow Jones industrial average cracking 13,000 for the first time since May as investors found renewed confidence in European leaders’ assurances that they would take action to save the troubled continent from its ongoing debt crisis.
A rally that began Thursday got a further boost Friday after German Chancellor Angela Merkel and French President Francois Hollande issued a statement saying they were “determined to do everything in order to protect the euro-zone.”
The leaders “basically said to financial markets, ‘We’re going to create a firewall here,’ ” said Diane Swonk, chief economist of Mesirow Financial.
Investors first perked up on Thursday after European Central Bank President Mario Draghi pledged during a speech in London that his institution was “ready to do whatever it takes to preserve the euro.”
“That turned the markets’ psychology from one that was adverse to one that was at least tacitly optimistic,” said Dennis Gartman, editor and publisher of the Gartman Letter, a widely read newsletter about global capital markets.
Draghi is set to meet with Jens Weidmann, head of Germany’s central bank, to discuss possible moves to shore up Europe’s economy, according to Bloomberg News. Those could include additional bond purchases from debt-ridden countries such as Spain and Italy.
In addition, U.S. Treasury Secretary Timothy F. Geithner will travel to Europe on Monday to meet separately with Draghi and Wolfgang Schaeuble, Germany’s finance minister, the Treasury Department said.
“Europe went from being in a near-crisis phase again to a near stop-gap solution,” Swonk said.
The Dow rose 1.5 percent Friday to 13,075.66, while the Standard & Poor’s 500 Index, a broader measure of stocks, was up 1.9 percent to 1,385.97. The tech-heavy Nasdaq soared 2.2 percent to 2,958.09.
All the indexes were up at least 1 percent for the week.
The euro gained against the dollar, finishing the week at $1.23.
After the encouraging signals out of Europe, investors seemed to shrug off a report from the U.S. Commerce Department on Friday showing that the nation’s economy grew at a rate of 1.5 percent during the second quarter.
Although that tepid pace reinforces concerns about the strength of the recovery, Jim O’Sullivan, chief U.S. economist for High Frequency Economics, said that the report likely didn’t drag markets down because it was in line with analysts’ forecasts.
Yields on U.S. Treasury bonds hit 1.55, up from from 1.427 on Monday.
In quarterly earnings reports released this week, some U.S. companies said that Europe’s problems are weighing on their revenues. Ford reported a loss on the continent, in part because of the struggling economy there. The automaker said Wednesday that it has revised its expected losses in Europe for the year to more than $1 billion.
In a conference call with analysts about its earnings, Starbucks reportedly said that it was considering closing some poorly performing European outposts. And science and engineering company DuPont cited “continued weakness in Europe” as a challenge.