The Dow Jones industrial average jumped 170 points in morning trading, following European markets higher. U.S. shares got another boost after from a surprisingly strong reading on regional manufacturing activity from the Federal Reserve Bank of Philadelphia.
Markets had been roiled in recent days by fears that Ireland would be the next European country to need a bailout. Greece came close to fiscal collapse in May and had to be rescued by other European countries and the International Monetary Fund. Fears that Greece’s fiscal morass would undermine Europe’s shared currency, the euro, and lead to bailouts of other European countries brought stock prices down around the world in May and early June.
Signs of progress in talks among Irish and European officials Thursday gave investors hope that the country would reach a deal soon with the European Union and the IMF to shore up its finances. Ireland has nationalized three of its six local banks following a collapse of the country’s real estate market.
Ireland is also expected to accept a loan worth tens of billions of euros from England. While England isn’t one of the 16 nations that uses the euro, its banks have large holdings of Irish government debt and would face major losses if the country defaulted.
The Dow rose 171.87, or 1.6 percent, to 11,179.75 in morning trading.
The Standard & Poor’s 500 index rose 19.66, or 1.7 percent, to 1,198.25. The Nasdaq composite index rose 43.94, or 1.8 percent, to 2,519.95.
The euro rose against the dollar as assurance grew that Ireland would resolve its debt problems. Major European stock indexes all rose more than 1 percent. The dollar fell against other currencies, commodities prices rose and Treasury prices fell as traders became more comfortable taking on risk.
General Motors‘ IPO was a hit on the New York Stock Exchange following its initial public offering. Shares of the industrial giant, which emerged from bankruptcy after a taxpayer-funded bailout, jumped $2.53 to $35.53, nearly 8 percent above its initial offering price of $33. GM officials rang the opening bell on the NYSE.
The jump in U.S. stock indexes comes after a weeklong slump caused by escalating worries over Ireland’s debt situation and signs that China would take more steps to slow down its supercharged economy, which would weaken demand for basic materials and industrial goods. Investors feared that a bailout of Ireland could damage confidence in the euro and drive up borrowing costs for other weak European nations like Portugal, Spain and Greece.
Overseas markets also rose. Britain’s FTSE 100 rose 1.5 percent, Germany’s DAX index gained 1.9 percent, and France’s CAC-40 jumped 2 percent. Japan’s Nikkei rose 2.1 percent.
Investors looking for clues about the health of the broader U.S. economy received another report that indicates employers are not rapidly hiring many workers, but are not cutting many jobs either.
The Labor Department said first-time claims for unemployment benefits rose slightly last week, in line with forecasts. Claims remain near their lowest levels in two years, but not low enough to signal the high unemployment rate will drop soon.
Bond prices retreated, pushing their yields higher. The yield on the 10-year Treasury note rose to 2.94 percent from 2.87 percent late Wednesday. The yield on the note, which is a widely used benchmark for consumer and business loans, traded as low at 2.49 percent on Nov. 4.
Rising bond yields are a sign that investors are more confident in economic growth and more willing to hold riskier assets such as stocks and commodities. The Federal Reserve has been buying Treasurys since Nov. 3 in an effort to keep interest rates low and encourage borrowing, but its $600 billion bond-buying program has been criticized at home and abroad as a risky move that could bring on inflation or more speculative bubbles.
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