Stocks moved sharply higher at the start of trading on Thursday, as traders reacted to news of an agreement potentially resolving the European debt crisis. The major averages all showed strong moves to the upside, with the Dow jumping back above 12,000 for the first time since early August.
The major averages have recently pulled back off their highs for the young session but remain firmly in positive territory. The Dow is up 234.77 points or 2 percent at 12,103.81, the Nasdaq is up 63.31 points or 2.4 percent at 2,713.98 and the S&P 500 is up 30.24 points or 2.4 percent at 1,272.24.
The initial strength on Wall Street came after European leaders finally struck a deal to pull the region out of its worst crisis since World War II.
Under the agreement to address the debt crisis, the capacity of the European bailout fund will be expanded to 1 trillion euros, or about $1.4 trillion, and Greece’s private debt holders have agreed to incur a 50 percent loss on holdings of Greek government bonds.
European leaders also approved a coordinated plan to recapitalize European banks. The ratio of highest quality capital will be increased to 9 percent, enabling the banks to withstand shocks under exceptional circumstances.
The markets have also benefited from some relatively upbeat U.S. economic data, including a report from the Commerce Department showing that third quarter GDP increased in line with economist estimates.
The report showed that GDP increased at an annual rate of 2.5 percent in the third quarter compared to the 1.3 percent increase seen in the second quarter. The increase in GDP marks the fastest growth since the third quarter of 2010 and matches the expectations of economists.
An acceleration in the pace of consumer spending growth contributed to the faster GDP growth, with spending rising by 2.4 percent in the third quarter after edging up by 0.7 percent in the second quarter.
The Labor Department also released a separate report showing a modest drop in initial jobless claims in the week ended October 22nd, although claims remained just above the key 400,000 level.
Financial stocks have shown a substantial move to the upside on the day amid easing concerns about potential exposure to the European debt crisis. The NYSE Arca Broker/Dealer Index has surged up by 6.8 percent, while the KBW Bank Index has jumped by 4.4 percent.
Benefiting from optimism about the global economic outlook, steel stocks have also moved sharply higher in early trading. Networking, railroad, oil service, and semiconductor stocks are also posting strong gains amid broad based buying interest.
In overseas trading, stock markets across the Asia-Pacific region saw considerable strength on Thursday, benefiting from the news out of Europe. Japan’s Nikkei 225 Index advanced by 2 percent, while Hong Kong’s Hang Seng Index surged up by 3.3 percent.
The major European markets have also shown substantial moves to the upside on the day. While the U.K.’s FTSE 100 Index is soaring by 3.2 percent, the German DAX Index and French CAC 40 Index have shot up by 5.2 percent and 5.8 percent, respectively.
In the bond market, treasuries have moved sharply lower amid the rally by stocks. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 8.6 basis points at 2.289 percent.