Stocks Start Week With a Rally
NEW YORK ( TheStreet) -- U.S. stocks advanced more than 1% Tuesday amid positive headlines out of Greece and China, even as the euro fell on worries about a deepening debt crisis across the pond.
Investors cheered new opinion polls that showed a shift in favor of austerity measures in Greece, boosting optimism that the country will remain in the euro zone. There was also some excitement about fresh stimulus measures from the Chinese government, news that led Asian stock markets higher.
Mixed economic data in the U.S. and another cut to Spain's credit rating from Egan Jones attempted to keep gains in check mid-session, but stocks still managed to close on a high note.
The Dow Jones Industrial Average gained 125 points, or 1%, to close at 12,580. The blue-chip index had run as high as 12,611.
Basic materials, capital goods and technology led the way Tuesday; although every group was in green. Within the Dow, 28 of the index's 30 components finished higher, led by Bank of America (BAC) , Alcoa(AA) , Caterpillar(CAT) , and United Technologies (UTX) .
Peter Cardillo, chief market economist at Rockwell Global Capital, attributed some of the strength to the steady selling that's dominated so far in May.
"I think we'll have an upward defensive market for most of the week," he said. "The market has reached oversold conditions and basically it's cheap in terms of valuations and present economic U.S. growth."
Tuesday's gains mark only the fifth such positive session for the Dow in the month of May. The major averages are still set to register their worst performance since September, with the Dow down about 5% in the past month. The Nasdaq and the S&P 500 have also given up between 5% and 6% each.
Cardillo also sees a good chance that Greece may ultimately remain part of the eurozone, a scenario that the market seemed to be planning against last week.
"I personally, contrary to other observers, I think that Greek elections will favor the nation staying in the Euro," he said. "The market needs to believe that."
London's FTSE settled up 0.7%, and the DAX in Germany closed up 1.2%, after political parties supporting austerity measures mandated by the European Union were shown to be receiving growing support in Greek opinion polls, with one of the pro-bailout parties coming in at the top in six polls published over the weekend.
Spain, however, was an ongoing source of concern across the pond as borrowing costs have spiked to their highs of the year since details of the country's $24 billion bailout for partially nationalized institution Bankia came to light late last week. The Spanish stock market fell sharply with banks leading the way, and is now down roughly 25% this year.