Stocks jumped at the start of what could be the most important week of the year for Wall Street as hopes grew that European leaders will find a solution to the region’s debt crisis at a summit later this week.
The bloc’s crisis has been the biggest overhang for US investors this year. Hope that European policymakers were entering an endgame sent the S&P 500 to its best week in almost three years last week with a rise of 7.4 per cent. On Monday the index inched above its 200-day moving average, a level closely watched by traders.
The financial sector, which has been hit hard this year due to concern about its exposure to Europe and global growth, was the best performing. The S&P financial index .GSPF rose 2.6 per cent. Morgan Stanley jumped 4.5 per cent to $16.22 and hit its highest level in a month earlier in the session.
Marc Pado, US market strategist at Cantor Fitzgerald & Co in San Francisco said stocks could rally into the end of the year if a convincing deal is reached in Europe, but he cautioned against too much optimism too soon.
“We are far from an easy consensus that it’s a done deal,” he said. “But we are further along in the negotiations than we’ve been and we are focused on the right things now.”
The Dow Jones industrial average gained 150.88 points, or 1.26 per cent, to 12,170.30. The Standard & Poor’s 500 Index rose 20.30 points, or 1.63 per cent, to 1,264.58. The Nasdaq Composite Index added 42.20 points, or 1.61 per cent, to 2,669.13.
French President Nicolas Sarkozy and German Chancellor Angela Merkel met in Paris, and Sarkozy said a proposed agreement between the two countries will be sent to EU officials on Wednesday ahead of Friday's summit.
The proposal to be taken up at the EU summit will mean a modified EU treaty, which will need to be approved by all 27 European Union leaders. In addition, a budget-balancing rule across the euro zone will be included.
