Stocks snap higher, Dow crosses above 13,000
NEW YORK (AP) -- Faced with Facebook, Starbucks and Angela Merkel, the market chose to focus on Merkel.
For a second day, the U.S. stock market powered higher on optimism generated by pledges from European leaders, including German chancellor Merkel, to preserve the union of the 17 countries that use the euro.
The Dow Jones industrial rose more than 200 points, bringing it above 13,000 for the first time since May 8.
There were plenty of troubling signs for anyone looking for them: U.S. economic growth was anemic in the second quarter, and Facebook and Starbucks fell heavily after reporting disappointing quarterly results. But on this day, investors chose to focus on the positive.
Merkel and French president Francois Hollande released a joint statement saying they were "determined to do everything to protect the eurozone." Their remarks followed a similar pledge the day before from Mario Draghi, the president of the European Central Bank.
Their statements are important because some investors fear that disaster would ensue if the countries that use the euro were split apart.
And for any plan to keep the euro countries together, Germany's participation is crucial because it usually foots the bill for bailing out the weaker countries.
That's why Merkel's statement Friday was important. But it was also short on details, and it also made clear that individual countries aren't off the hook but "must comply with their obligations" -- namely, the spending cuts that Germany has advocated and weaker countries like Greece have resisted.
"Talk is cheap," said Michael Strauss, chief investment strategist and chief economist at the Commonfund investment firm in Connecticut. "While there's some euphoria over this, at the end of the day, is Spain going to still be in a recession? Yes. Is Greece still going to be in a recession? Yes. So I wouldn't get too carried away.
Even so, the Dow's foray above 13,000 showed that investors were indeed feeling good. The last time the Dow closed above 13,000 was May 7, before worries about the European debt crisis re-exploded and erased much of the market's first-quarter gains. It also flitted above 13,000 since the end of February, but before that hadn't crossed the marker since May 2008, four months before the financial crisis imploded.
The Dow was up 222 points at 13,110 in afternoon trading. The S&P 500 is up 28 at 1,387 and the Nasdaq composite is up 66 points at 2,958.
Bond trading also reflected increased optimism among investors. The yield on the benchmark 10-year Treasury note jumped to 1.53 percent from 1.44 percent late Thursday. That means investors are shedding low-risk assets like U.S. government bonds and putting their money to work in other places, like the stock market.
In other positive signs, the euro rose against the dollar, stock indexes moved higher in Europe -- including a 4 percent leap in Spain's benchmark index -- and borrowing costs fell for Italy and Spain.
Despite the improved picture for Europe, there was little to like in the latest U.S. government report on economic growth. The U.S. economy grew just 1.5 percent in the second quarter, a paltry number that isn't enough to bring down the unemployment rate, and nervous consumers pulled back on spending.
Among other stocks making big moves:
-- Amazon jumped more than 6 percent, rising $15.13 to $235.14. The online retailer reported a steep drop in earnings but analysts were expecting the decline, which was caused mostly by costs related to buying a warehouse technology company.
-- Starbucks reported higher revenue and net income. But investors were disappointed that the company cut its outlook for the current quarter, worried over slowing traffic in June and July. It is also considering closing unprofitable stores in Europe. Starbucks fell 11 percent, losing $5.76 to $46.65.
-- Facebook, in its first quarter as a public company, reported a 32 percent jump in revenue. That might be welcome news at many companies, but it was lower than previous quarters. And revenue growth is especially important for a newly public company like Facebook, which didn't turn a profit but did attract investors who were willing to bet on fast-growing revenue. The stock dropped more than 9 percent, losing $2.55 to $24.30. It has not traded above its initial pricing of $38 since May 18, its first day as a public company.
(Copyright 2012 by The Associated Press. All Rights Reserved.)