The US stock market has posted substantial gains as Greece closes in on a deal to restructure its debt and avoid a default. This has overshadowed a small increase in unemployment claims last week.
The Dow Jones industrial average closed on Thursday up 70.61 points, or 0.6 per cent, at 12,907.94.
Two days of solid gains have erased about three-quarters of the losses from Tuesday, when the Dow fell 203 points, its biggest loss of the year.
The close has left the Dow up 97 per cent since March 9, 2009, its low point during the Great Recession.
Last week, the Dow closed above 13,000 for the first time since May 2008. The Standard & Poor’s 500 index has more than doubled in three years.
On Thursday, the S&P 500 added 13.28 points, or 1 per cent, to 1,365.91. It has gained 22.80 points since Tuesday, its best two days since December. All 10 industry groups rose, led by materials companies.
The Nasdaq composite index rose 34.73 points, or 1.2 per cent, to 2,970.42.
Greek government officials say more than 75 per cent of investors in Greek bonds have agreed to exchange them for bonds with a lower face value and interest rate.
Greece needs 90 per cent of investors to participate to get a bailout of 130 billion euro ($A162.73 billion) and avoid a default later this month that could rattle financial markets around the world. The Athens government will release final results Friday.
The Greek crisis is “starting to wind down, we hope,” said Paul Powers, head of US equity sales trading for Raymond James. “It doesn’t seem nearly as dire as it was a couple of weeks ago.”
The rally came despite a report from the Labour Department that the number of people seeking unemployment benefits rose slightly more than expected last week. The four-week average remained near a four-year low.
The government reports Friday on how many jobs the US economy added in February and the unemployment rate. Economists expect 200,000 jobs were added. If the unemployment rate falls from 8.3 per cent, it would be the sixth straight decline.
“The trend here is that the job market has continued to grind higher, and I don’t see any reason why tomorrow’s number shouldn’t be a good one,” said Phil Orlando, chief equity market strategist at Federated Investors.
He pointed to a private estimate of hiring released Wednesday that exceeded expectations, along with the unemployment claims figures, as good indicators for more positive news.
Stocks have risen around the world as optimism about the Greek debt deal takes hold. In Europe, the FTSE 100 index of leading British stocks closed up 1.2 per cent. Germany’s DAX and the CAC-40 in France both gained 2.5 per cent.
The euro rose almost a penny and a half against the US dollar, to $1.328. In another sign of investor confidence in Europe, the yields on government bonds of both Italy and Spain both fell.
Asian markets also rallied, ending a three-day losing streak. Japan’s Nikkei Stock Average climbed 2 per cent, Hong Kong’s Hang Seng jumped 1.3 per cent and China’s Shanghai Composite Index rose 1.1 per cent.
The prospect of a successful bond swap in Greece also helped push oil prices higher. Resolving the crisis would be good for the European economy, and demand could rise. Oil closed near $107 per barrel on the New York Mercantile Exchange. Gold prices also rose.
The yield on the benchmark 10-year US Treasury note rose to 2.01 per cent from 1.98 per cent late Wednesday.
Brian Gendreau, market strategist for Cetera Financial Group, says even if some of Greece’s private investors reject the bond swap deal, the situation in Europe is clearly improving.
“A year and a half ago, the idea that private bondholders would take a hit wasn’t even on the table,” Gendreau said.
Gendreau said the market’s response to a possible Greek default would not be as harsh as last year, when some wondered whether the euro might collapse. He would expect “fatigue and exasperation. But that’s not the same as panic and crisis.”
Among stocks making big moves Tuesday:
– Coach Inc. jumped 4.6 per cent after the luxury accessories maker said it is sticking to its long-term sales goals.
– McDonald’s Corp. lost more than 3 per cent after reporting slower growth in February.
– American International Group Inc. fell 1.1 per cent after the US government said it would sell $6 billion of the common stock it holds in the bailed-out insurer.
