Stocks Open Higher; Traders Hope For ECB Action
NEW YORK (AP) â Faced with Facebook, Starbucks and Angela Merkel, the market chose to focus on Merkel.
For a second day, the U.S. stock market powered higher on optimism generated by pledges from European leaders, including German chancellor Merkel, to preserve the union of the 17 countries that use the euro.
The Dow Jones industrial average briefly flitted above 13,000, a key psychological market that it hasn't hit since May 8.
There were plenty of troubling signs for anyone looking for them: U.S. economic growth was anemic in the second quarter, and Facebook and Starbucks fell heavily after reporting disappointing quarterly results. But on this day, investors chose to focus on the positive.
Merkel and French president Francois Hollande released a joint statement saying they were "determined to do everything to protect the eurozone." Their remarks followed a similar pledge the day before from Mario Draghi, the president of the European Central Bank.
Their statements are important because some investors fear that disaster would ensue if the countries that use the euro were split apart.
And for any plan to keep the euro countries together, Germany's participation is crucial because it usually foots the bill for bailing out the weaker countries.
That's why Merkel's statement Friday was important. But it was also short on details, and it also made clear that individual countries aren't off the hook but "must comply with their obligations" â namely, the spending cuts that Germany has advocated and weaker countries like Greece have resisted.
"Talk is cheap," said Michael Strauss, chief investment strategist and chief economist at the Commonfund investment firm in Connecticut. "While there's some euphoria over this, at the end of the day, is Spain going to still be in a recession? Yes. Is Greece still going to be in a recession? Yes. So I wouldn't get too carried away.
Even so, the Dow's foray above 13,000 showed that investors were indeed feeling good. The last time the Dow closed above 13,000 was May 7, before worries about the European debt crisis re-exploded and erased much of the market's first-quarter gains. It also flitted above 13,000 since the end of February, but before that hadn't crossed the marker since May 2008, four months before the financial crisis imploded.