Wall Street surges on relief over euro zone

Dow Jones: 11,246.73 (+140.88) Nasdaq: 2,572.55 (+40.40) SP 500: 1,188.68 (+15.81)

US STOCKS rose yesterday, sending the Standard and Poor’s 500 Index higher for a third day, as French president Nicolas Sarkozy and German chancellor Angela Merkel said they are convinced Greece will remain in the euro zone.

The Dow Jones Transportation Average, a proxy for the economy, added 3.2 per cent, as FedEx jumped 2.8 per cent.

“It’s a psychological lift,” Peter Sorrentino, a senior money manager at Huntington Asset Advisors in Cincinnati, said. “The Europeans haven’t given up hope. It buys them another day. There’s a desire to keep the euro strong, to keep that as an alternative to the dollar. The question is – do they have the mechanism in place to avoid a domino effect?”

Concern that the global economy was slipping back into a recession amid a worsening European-debt crisis triggered an 18 per cent plunge in the SP 500 between April and August 8th. Since then, the index has rebounded 4.8 per cent through yesterday.

Ms Merkel is convinced the future of Greece is inside the euro area, following a telephone conversation with Prime Minister George Papandreou and Mr Sarkozy, a government spokesman Steffen Seibert said.

The fulfillment of Greece’s adjustment program is “more than ever” essential and is a condition for the payment of further aid tranches, Ms Merkel said. Mr Papandreou committed to meet deficit-reduction targets demanded as a condition for an international bailout, according to statements distributed by Athens and Paris, easing concerns Greece may default on its debt.

“It’s a relief rally,” John Carey, a Boston-based money manager at Pioneer Investments, said. “Over the last few days, there had been speculation that Germany was about to pull the plug and abandon the effort to keep Greece solvent and funded. Stocks have been beaten up and there are bargains.

GE gained 3.9 per cent to $16.01. Home Depot jumped 4 per cent to $33.95. Monsanto climbed 4.1 per cent to $70.15. Dell increased 4.4 per cent to $15.01.

Yahoo! climbed 3.5 per cent to $14.76 as investor Third Point ramped up pressure on the company’s board, saying it may add to its 5.2 per cent stake. – (Bloomberg)