Wall Street erases early losses from EU woes

Dow Jones:11,061.12 (+68.99) Nasdaq:2,495.09 (+27.10) S&P 500:1,162.27 (+8.04)

US STOCKS erased losses yesterday, after the Financial Times reported that Italy was in talks with a Chinese investment firm to buy bonds, offsetting concern that Greece may default on its debt.

Chipmakers and banks in the Standard and Poor’s 500 Index rallied.

NetLogic Microsystems rose 52 per cent after Broadcom agreed to buy the semiconductor company for $3.7 billion in cash.

The Dow Jones industrial average finished up 68.99 points, or 0.63 per cent, at 11,061.12.

The Standard & Poor’s 500 Index was up 8.04 points, or 0.70 per cent, at 1,162.27.

The Nasdaq Composite Index ended 27.10 points higher, or 1.10 per cent, at 2,495.09.

Equities pared their retreat after the Financial Times said Italy has approached China about selling “significant” quantities of bonds and investments in some companies.

“It’s going to be dicey,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial, which oversees $883 billion, said in a telephone interview.

“Until we see an easing in credit markets, it’s going to be difficult to take advantage of good valuations,” he said.

Between April 29th and August 8th, the S&P 500 fell 18 per cent on concern about Europe’s debt crisis and an economic slowdown.

Stocks tumbled across the globe as the MSCI World Index extended a drop from its 2011 high to 20 per cent.

Moody’s Investors Service may cut the ratings of BNP Paribas, Société Générale and Credit Agricole this week because of their Greek holdings, two people with knowledge of the matter said.

Greece’s chance of default in the next five years has soared to 98 per cent as Prime Minister George Papandreou fails to reassure international investors that his country can survive the euro-region crisis.

“Everyone’s pricing in a pretty near-term default,” said Peter Tchir, founder of hedge fund TF Market Advisors in New York.

“Clearly this austerity plan is not working,” he said.

The S&P 500 may slump as much as 21 per cent, Bank of America technical analysts said. – (Bloomberg)