Greece reaching an agreement for a third bailout program boosts stocks
U.S. stocks closed sharply higher on Monday, 13 July 2015 as investors were relieved that Greece and its creditors reached an agreement for a third bailout program, averting a potential 'Grexit'. The main indexes recorded their third consecutive session of gains, while Dow industrials advanced more than 200 points for the second session in a row.
The Dow Jones Industrial Average jumped 217.27 points, or 1.2%, to 17,977.68, with all but one of its member closing higher. The Nasdaq Composite climbed 73.82 points, or 1.5% to 5,071.51. The S&P 500 closed 22.98 points, or 1.1%, higher at 2,099.60, with all 10 main sectors finishing with gains. Technology and consumer discretionary stocks led the gains.
Equity indices spiked at the start after lengthy weekend negotiations between Greek representatives and eurozone officials produced a framework for the third rescue package for Greece. The agreement, which includes EUR25 billion in bank recapitalization funds, was cheered by global equity markets, but it is worth noting that the full bailout will be discussed once the country's government passes a series of reforms on Wednesday. The far-reaching concessions will require Greece to streamline value-added taxes, broaden its tax base to increase revenue, curtail pension costs, and privatize public assets worth as much as 50 billion euros.
Global risk assets surged in reaction to the developments while outflows from the Treasury market weighed on the 10-yr note, sending its yield higher by three basis points to 2.43% after testing the 2.47% level in the early morning.
All ten sectors ended in the green with five groups adding 1.0% or more. Heavily-weighted sectors fueled today's advance with the technology sector holding the lead throughout the session.
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Large-cap sector components like Apple, Facebook, Google and Microsoft spiked between 1.9% and 2.8% while Seagate advanced 0.7% despite lowering its Q4 revenue and gross margin guidance.
U.S. equities followed a rally in European equity markets, spurred by news that a Greek exit from the eurozone had been avoided. After a 17-hour meeting, eurozone leaders agreed early Monday on a package of reform measures in principle for the debt-laden country, paving the way for formal negotiations on financial aid through the eurozone's bailout fund, the European Stability Mechanism, or ESM.
Today's participation was comparable to recent totals as more than 730 million shares changed hands at the NYSE floor.
Economic data was limited to the Treasury Budget statement for June, which showed a surplus of $51.80 billion while the Briefing.com consensus expected a surplus of $51.00 billion. The Treasury data are not seasonally adjusted, so the June surplus cannot be compared to the $82.40 billion deficit recorded in May.
Bullion prices ended lower at Comex on 13 July 2015 at Comex. Gold futures settled lower for a third straight session as relief that Greece reached a deal with its creditors put pressure on prices Monday. A higher U.S. dollar index on this day was also a negative for the precious metals markets. August gold lost $2.50, or 0.2%, to settle at $1,155.40 an ounce on Comex after tallying a decline of more than $5 an ounce in the past two trading sessions. September silver ended down 2.4 cents, or 0.2%, at $15.457 an ounce after tacking on 0.8% on Friday.
Crude oil futures succumbed to pressure on Monday, 13 July 2015 from expectations of higher global supplies tied to Iran, rising production from the Organization of the Petroleum Exporting Countries and a strong U.S. dollar. Greece's deal with creditors eased worries over energy demand in Europe, offering some support for oil prices, while OPEC's monthly report also showed an increase in the cartel's forecast for global oil demand growth this year. On the New York Mercantile Exchange, August West Texas Intermediate crude settled at $52.20 a barrel, down 54 cents, or 1%, after trading between a high of $53.17 and low of $51.26.
Tomorrow, June Retail Sales (consensus 0.3%) and Import/Export Prices for June will be released at 8:30 ET while the Business Inventories report for May will be reported at 10:00 ET (consensus 0.2%).
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