U.S. stocks end higher, with Dow up 1.4% on week

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — U.S. stocks closed higher on Friday, with the three benchmark indexes scoring gains for the week, as European leaders agreed to closer fiscal ties and U.S. consumer confidence hit a six-month high.

“It’s an important step towards being able to right their fiscal house, and for the euro to remain the single currency,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, said of the accord reached at the European Union summit.

“But it doesn’t cure the immediate issue of low or in some countries negative growth,” he added of the euro region.

Logging a second consecutive week of gains, the Dow Jones Industrial Average DJIA +1.55%  rose 186.56 points, or 1.6%, to finish at 12,184.26, for a 1.4% gain on the week. Caterpillar Inc. CAT +0.32% and General Electric Co. GE +0.48%  paced the gains that extended to all but one of its 30 components.

DuPont Co. DD -0.44%  dropped 3.2% after the chemical maker and Dow component lowered its outlook for the current fiscal year.

The S&P 500 Index SPX +1.69%  added 20.84 points, or 1.7%, to 1,255.19 with financial companies pacing the gains among its 10 major industry groups. The index finished the week 0.9% higher.

The Nasdaq Composite COMP +1.94%  advanced 50.47 points, or 1.9%, to 2,646.85, ending the week up 0.8%.

For every stock falling nearly six gained on the New York Stock Exchange, where 819 million shares traded by the close.

Equities and U.S. Treasury yields gained after 26 European nations said they’ll think about linking their economies more closely. And the 17 nations that use the euro said they would sign an accord that would give a central authority better oversight of their budgets. Nine other European Union countries agreed to consider signing the treaty, while Britain said it would not, as it does not want to be subjected to the proposed financial rules. Read story on Europe summit.

“Europe is inching closer to what it will eventually have to do. It shows a determination that when push comes to shove, they will take whatever actions are necessary to calm the markets, but I’m not very impressed,” said David Kelly, chief market strategist at J.P. Morgan Funds.

“There was a lot of bad news already priced into the market,” Kelly added of Wall Street’s rise in the wake of an agreements he and others found lacking in specifics.

Going forward, Europe “will continue to be the tail that wags the dog,” said Matthew Tuttle, chief investment officer at Tuttle Wealth Management, LLC in Stamford, Conn.

“Volatility will still be high and all bets are off if the EU can’t agree on anything to appease the markets, but with all the cash on the sidelines and money managers underperforming by historic levels, we could be setting up for the mother of all Santa Claus rallies,” he said.

The costs of borrowing for European governments edged lower Friday, with Italy’s 10-year yield at a still-dangerously high 6.3%, with a yield of 7% or above viewed as the tipping point, which if it were to remain for an extended period would push the nation into default.

“This will only be probably solved when investors are able to buy Italian bonds at reasonable interest rates,” said Kelly.

“It’s not the big bazooka that the market wanted but it was good enough to take it off the front burner and run over lots of shorts. With bond auctions in Spain and Italy in the next two weeks, our market will have to pay attention,” emailed Elliot Spar, market strategist at Stifel Nicolaus, in afternoon commentary.

The major indexes also drew a lift after the University of Michigan/Thomson Reuters index of consumer sentiment reached 67.7 in the initial reading for December, its highest level since June. See story on consumer sentiment.

“At the moment I would give the majority of the market’s movement on any given day to Europe. But, the stronger our domestic picture looks the more enthused market participants can be about U.S. equities,” said Luschini at Janney Montgomery Scott.

Another report Friday had the Commerce Department releasing figures that showed purchases from overseas declined to the lowest level since April, as demand for petroleum dropped sharply. See story on trade balance.

Kate Gibson is a reporter for MarketWatch, based in New York. Myra Saefong in San Francisco contributed to this report.

Source: http://www.marketwatch.com/story/us-stocks-open-up-after-eu-reaches-accord-2011-12-09 

Posted in: Business,USA