NEW YORK — The U.S. stock market powered higher for a second day Friday after European leaders, including German Chancellor Angela Merkel, pledged to protect the union of 17 countries that use the euro. The Dow Jones industrial average blew past 13,000, a key marker that it hadn’t hit since early May.
The rally occurred despite troubling signs about the economy. U.S. economic growth was anemic in the second quarter. A measure of consumer sentiment fell in July as people worried about their job prospects. And Facebook and Starbucks dropped sharply after reporting disappointing quarterly results.
Ignoring the negative reports, investors focused on remarks coming from Europe.
Most notably, Merkel and French President Francois Hollande released a joint statement saying they were “determined to do everything to protect the eurozone.” That followed a similar pledge the day before from Mario Draghi, the president of the European Central Bank.
Merkel’s statement was closely watched because Germany will have to sign on if any plan to keep the euro countries together is to succeed. As one of the stronger countries, Germany usually pays most of the bill for bailing out the weaker ones.
For all the rejoicing, a longstanding roadblock remains: Germany wants other European nations to agree to cut spending. Weaker countries such as Greece are resisting. The statement from Merkel and Hollande made clear that individual countries aren’t off the hook but “must comply with their obligations” — meaning a showdown over spending cuts is still possible.
Jim Millstein, chief executive officer of the Washington, D.C., financial advisory firm Millstein & Co., said investors shouldn’t be surprised if any European rescue plan takes a long time. The eurozone countries currently function with no real unity on their fiscal policies, even though they use the same currency.
“They are engaged in a very difficult project, which is to transform a monetary union into a fiscal union, and that is a cumbersome process,” Millstein said. “It takes longer than the markets might otherwise like.”
But the markets liked what they heard Friday. The Dow obliterated the 13,000 mark, climbing 187.73 points to 13,075.66. In two days, it climbed 400 points.
The Standard & Poor’s 500 jumped 25.95 to 1,385.97. The Nasdaq composite index rose 64.84 to 2,958.09.
On the New York Stock Exchange, five stocks rose for every one that fell. Consolidated volume was a heavier-than-average 4.2 billion shares.
The yield on the benchmark 10-year Treasury note jumped to 1.54 percent from 1.44 percent the day before. That means investors are feeling more confident about the economy and more willing to put their money in the stock market instead of low-risk government bonds.
In other positive signs, the euro rose against the dollar, stock indexes moved higher in Europe — including a 4 percent leap in Spain’s benchmark index — and borrowing costs fell for Italy and Spain.
Business, Pages 28 on 07/28/2012