Stocks gain as Europe moves closer to budget pact
U.S. stock indexes rose strongly Friday morning after every European nation except for Britain agreed to consider forging closer economic ties in hopes of preventing another debt crisis.
All 17 nations that use the euro will sign a treaty that allows a central European authority closer oversight of their budgets. Nine other EU nations are considering it. Britain is the sole holdout.
The agreement came in marathon overnight talks among European leaders at a two-day summit in Brussels. An agreement on tighter fiscal controls is considered a crucial step before the European Central Bank commits more money to lowering borrowing costs of heavily indebted countries like Italy and Spain.
The Dow Jones industrial average rose 126 points, or 1.1 percent, to 12,124 in the first hour of trading. DuPont limited the Dow's gain. The chemical and materials company slumped 4.7 percent after the company said it expects earnings this year will fall well short of Wall Street's forecasts because of weak demand for electronics and industrial supplies.
Bank stocks led the market higher, reflecting traders' optimism about Europe's progress toward solving its crisis. Morgan Stanley jumped 5.3 percent, while Citigroup Inc. rose 4.6 percent.
Banks have been weighed down for months by fears about their exposure to Europe. The biggest European banks have been downgraded. If Europe's crisis spins out of control, U.S. banks that do business with them will suffer.
The S&P 500 rose 14 points, or 1.1 percent, to 1,248. The Nasdaq rose 25, or 1 percent, to 2,621.
The gains were broad. All 10 of the S&P's 10 industry groups rose.
Stocks in Europe rose higher after U.S. markets opened.
Germany and France, the two biggest economies in the euro zone, had hoped to persuade all 27 members of the European Union to change an EU treaty and impose tight fiscal rules on its members. Britain refused to join in because it wanted to be exempt from proposed financial rules.
Many think the only path out of the debt crisis is a more active role by the European Central Bank, which could buy up more government debt to keep nations' borrowing costs down. It currently buys bonds in the markets, but only reluctantly, and in small quantities.
Among other U.S. companies making big moves:
— Pall Corp. surged 10.7 percent after the filtration equipment maker reported fiscal first-quarter earnings that far exceeded analysts' expectations.
— The Cooper Cos. Inc. leaped more than 15 percent after the eye care company topped expectations with its fiscal fourth-quarter performance.
— Texas Instruments Inc. fell 1.8 percent after the semiconductor maker said the weak global economy has hurt demand for electronic devices that use its chips.