US and European stocks rally on German court approval for Eurozone bailouts and hopes for Obama's jobs stimulus plan tomorrow
Stocks on Wall Street rebounded as investors applauded signs on both sides of the Atlantic that governments are solving fiscal problems and will commit funds to spur the economic recovery.
In Europe, a German court rejected lawsuits aimed at banning the government from contributing taxpayers’ money to the bailout of troubled euro-zone nations. Even so, the court also said the government has to get approval from a parliamentary committee.
"While a resolution to the issues in Europe is not immediate, this shows that they seem to be on the path of making some progress," Howard Ward, chief investment officer at GAMCO Growth in Rye, New York, told Reuters. "That's a huge positive."
Also boosting stocks were reports that U.S. President Barack Obama was set to reveal a US$300 billion economic stimulus package of tax cuts and government spending, in efforts to not only bolster growth but also his chances to get reelected in 2012. He’s to detail his plan in a speech tomorrow night.
In late afternoon trading, the Dow Jones industrial average climbed 2.24%, the Standard & Poor's 500 Index rose 2.72% and the Nasdaq Composite Index gained 2.83%.
“The market is trying to feel the ground for a bottom,” Barry James, president of James Investment Research Inc. in Xenia, Ohio told Bloomberg News.
“It’s maybe going in the right direction with the President showing a little more of a pro-business, pro-growth concept. If they can agree to something in Washington that’s along those lines, we’ll be pretty happy.”
The cost of the proposed package, to be announced by Obama in a nationally televised speech to Congress on Thursday, would be offset by other cuts that the President would outline, CNN reported, citing Democratic sources.
Bloomberg said the plan, aimed at creating jobs, would inject more than US$300 billion into the economy next year through tax cuts, spending on infrastructure, and aid to state and local governments.
The White House declined to comment on the reports, Reuters said.
Separately, the Federal Reserve said the pace of economic expansion across the U.S. varied among regions.
“Economic activity continued to expand at a modest pace, though some districts noted mixed or weakening activity,” the Fed said in its Beige Book survey released today in Washington.
And in Canada, the central bank held its key interest rate steady for an eighth meeting, citing a “diminished” need for an increase as Europe’s fiscal crisis and a sluggish U.S. rebound curtail the global recovery.
Investors seemed to welcome Yahoo Inc’s move to fire CEO Carol Bartz as its shares rose 4%.
Across the Atlantic, the Stoxx Europe 600 Index advanced 3.1% from a two-year low.
The euro also got a lift after Italian Prime Minister Silvio Berlusconi won a confidence vote on austerity measures. The battered euro zone currency was last up 0.7% to US$1.4094.
Spanish legislators also added to hopes that efforts were proceeding to check the debt crisis. They passed a constitutional reform on capping future deficits.