Commodities stocks lead rally; Greece fears contained
The U.S. stock market enjoyed a solid rally today as a better than expected unemployment claims and a retreating dollar lifted commodities stocks.
The verbal commitment from European leaders to help Greece calmed fears, although market participants awaited a detailed plan.
The S&P 500 Index gained 0.97 percent, or 10.34 points, to close at 1,078.47. The Dow Jones Industrial Average gained 105.81 points, or 1.05 percent, to close at 10,144.19.
Commodities prices rose today. Oil, which dipped below $70 dollars in intra-day trading last Friday, is trading above $75. Gold and copper gained significantly.
Commodities stocks performed well, with the Dow Jones U.S. Basic Materials Index gaining 2.28 percent and Dow Jones U.S. Oil & Gas Index rising 1.64 percent.
Miners did particularly well today, as the American Depository Receipts (ADRs) of Vale (NYSE:VALE) gained 3.44 percent while those of Rio Tino (NYSE:RTP) gained 3.61 percent.
Financial stocks underperformed the broad market. American banks were mixed while shares of European banks traded in the U.S. are mostly down. The Dow Jones U.S. Financials Index is up only 0.32 percent.
The muted performance of financials reflected the response of market participants; fears were calmed but investors were not thrilled.
European leaders promised to support Greece if necessary. However, they have not confirmed any plans and did not make any specific promise to actually give monetary support.
According to Pat O'Hare of Briefing.com, European governments are calming the market with their words before they need to do it with their cash.
So far, with the drop in 5-year credit default swap spreads for Greece, the EU can keep its wallet in its pocket; however, if those credit default swap spreads increase again, the EU will soon be forced to put its money where its mouth is to convey to the market just how serious it is, said O'Hare.
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