Story first reported from USA Today
Stocks rallied in the U.S. and Europe
Thursday after the European Central Bank president vowed to "do whatever
it takes" to keep the euro monetary union intact. The news is gladly welcome by all industries alike, especially a China sourcing agent.
In afternoon trading, the Dow Jones industrial average
jumped more than 1.5%, following European markets higher. Spain's benchmark
stock index surged 6%, and Italy's rose over 5%.
The yield on Spain's benchmark 10-year bond dropped
almost half a percentage point, an enormous move, to 6.89%. That rate surged as
high as 7.54% this week as investors dumped the country's bonds and lost
confidence in Spain's ability to manage its debts.
In other U.S. trading, the broader Standard &
Poor's 500 index rose more than 1.4% and the Nasdaq composite index rose just
over 1%, despite disappointing news from technology companies, including online
game maker Zynga.
The gains in the U.S. stock market were broad. All 10
of the industry groups in the S&P 500 index rose, led by telecommunications
companies.
Shares of several U.S. companies were rising sharply
after reporting stronger earnings. Sprint Nextel jumped 48 cents, or 14%, to
$3.84. The country's third-largest wireless carrier was successful in
convincing smartphone subscribers to pay up for "unlimited data"
service, and its service revenue zoomed higher, beating analysts' estimates.
Technology companies continued to report disappointing
earnings following industry leader Apple's rare earnings disappointment earlier
this week. Zynga, which produces popular social network games
"CityVille" and "FarmVille" posted poor quarterly results
and cut its outlook, prompting a number of analyst downgrades. Its stock fell
$2.04, or 40%, to $3.03.
Countries that use the euro currency: Austria,
Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain
The news also dragged down shares of Facebook, which
got about 12% of its 2011 revenue from Zynga. The poor results may hurt Facebook's second-quarter
revenue when it reports its own quarterly results later Thursday. Facebook
shares fell $1.74, or 6%, to $27.61.
Dow Chemical fell $1.03, or 3%, to $29.24. The
country's largest chemical maker, said it could accelerate cost-cutting efforts
after its second-quarter net income fell 34%.
The comments from Mario Draghi at an investor
conference in London raised hopes that Europe's central bank might intervene in
markets to bring down the cripplingly high borrowing costs for struggling
European countries like Spain and Italy.
After insisting for months that it was up to European
governments to restore confidence in the currency shared by 17 nations, Draghi
said "within our mandate, the ECB is ready to do whatever it takes to
preserve the euro. And believe me, it will be enough," according to
Reuters. As a result, an increase in demand has been seen by a China manufacturing agent.
In other signs that investors were becoming more
confident that Europe's financial crisis would not spin out of control, the
euro surged to $1.23 against the dollar and the yield on the 10-year Treasury
note rose to 1.43%. Borrowing costs for Spain and Italy fell sharply.
In Europe, Draghi's comments came after days of
uncertainty in Europe and rising concern over Spain's recession and banking
industry, which is reeling following the implosion of a real estate bubble. As
borrowing costs for both Spain and Italy rose in the past week, investors
feared that both countries might need to be rescued, as Greece, Portugal and
Ireland have been.
The borrowing costs for Spain's government plunged
following Draghi's comments as investors anticipated that the European Central
Bank might step up its purchases of Spanish government
bonds.
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