NEW YORK — European Central Bank President Mario Draghi’s vow Thursday to “do whatever it takes” to keep the continent’s monetary union intact was the buy signal markets were waiting for.
The Dow Jones industrial average Thursday jumped 211.88 points, or 1.7 percent, to 12,887.93 after big gains in European markets.
Benchmark stock indexes in Spain and Italy surged 6 percent and 4 percent in France.
Draghi’s comments at an investor conference at the Olympics raised hopes that Europe’s central bank might intervene to lower the high borrowing costs for Spain and Italy.
After insisting for months that it was up to European governments to restore confidence in the currency shared by 17 nations there, Draghi pledged that “the [central bank] is ready to do whatever it takes to preserve the euro.”
That commitment fueled global markets. “The No. 1 problem in the world now is Europe’s finances,” John Fox, director of research at Fenimore Asset Management, said. “When the head of the [central bank] comes out and says he’s willing to do anything, that’s code for ‘We are going to agree to resolve this issue.’”
As earnings reports this week from Caterpillar and Ford have shown, Europe’s troubles can have an effect on the results of major U.S. corporations.
“Close to 20 percent of the S&P 500 companies’ revenues comes from Europe,” said Lawrence Creatura, portfolio manager at Federated Investors. “We’re in a global, interconnected economy, and Europe’s troubles are our own today.”
The broader Standard & Poor’s 500 index rose for the first time in five days. It was up 22.13 points, or 1.7 percent, to 1,360.02 The gains in the U.S. stock market were broad. All 10 of the industry groups in the S&P 500 index rose, led by telecommunications companies.
The Nasdaq composite index rose 39.01 points, or 1.4 percent, to 2,893.25.
Rising stocks outpaced losing ones by three to one on the New York Stock Exchange. Consolidated volume was a heavy 4.4 billion shares.
Several U.S. companies were also rising sharply after reporting stronger earnings. Sprint Nextel jumped 68 cents, or 20 percent, to $4.05. The country’s third-largest wireless carrier was successful in convincing smartphone subscribers to pay up for “unlimited data” service, and its service revenue zoomed higher, beating analysts’ estimates.
Technology companies continued to report disappointing earnings after industry leader Apple’s rare earnings disappointment earlier this week.
Zynga, which produces popular social network games CityVille and FarmVille, posted poor quarterly results and cut its outlook, prompting a number of analyst downgrades. Its stock fell $1.90, or 37.5 percent, to $3.17.
Business, Pages 30 on 07/27/2012