Stocks rebound after shrugging off Europe unease
A trader on the floor of the New York Stock Exchange. Stocks rose Tuesday, June 12, 2012, after a Federal Reserve official said he supported more measures to stimulate the U.S. economy. / AP Photo/Richard Drew
(CBS/AP) NEW YORK - U.S. stocks shot higher Tuesday, recovering some of their big loss from a day earlier, after a Federal Reserve official said he supported more measures to stimulate the economy.
The Dow Jones industrial average climbed 163 points to end at 12,574. That more than erased a loss on Monday, when waning enthusiasm for a European plan to bail out Spanish banks caused a sharp drop in stocks.
In other market action, the Standard & Poor's 500 index gained 15 points to 1,324, and the Nasdaq composite rose 33 points to 2,843.
In a statement that appeared to cheer investors, Federal Reserve Bank of Chicago president Charles Evans told Bloomberg News that he supported action to produce faster job growth. Last week, Fed Chairman Ben Bernanke said he was ready to act if the economy needs it but made no promises.
Energy stocks rose the most after the price of crude oil recovered from an eight-month low earlier in the day, but almost all industries in the U.S. market were higher.
On Tuesday, Spain's borrowing costs jumped for a second day, to the highest level since Spain adopted the euro currency. Borrowing costs edged closer to levels that forced Greece, Ireland, and Portugal to ask for emergency financing.
Spain's European neighbors pledged over the weekend to lend the country up to $125 billion to distribute to its ailing banks. But investors are worried about whether Spain will have to repay that loan before it pays its other debt.
That makes bondholders less willing to buy Spain's debt and demand a higher interest rate to compensate for the added risk that they will not be paid back first if Spain is unable to pay all its debt.
"The market needs some confidence and foreign buyers won't buy Spanish debt if they won't get paid first," said William O'Donnell, head of U.S. treasury strategy at Royal Bank of Scotland.
The interest rate, or yield, on Spain's 10-year bond rose 0.20 percentage point to 6.67 percent. It rose as high as 6.81 percent earlier in the day. At 7 percent, economists say, countries generally can no longer finance their own debt.
Investors are also nervous ahead of an election in Greece this weekend which may determine whether that country cuts itself free from the euro.
Stocks slipped early in Madrid, then turned positive and were up 0.1 percent after U.S. markets opened. France's CAC-40 rose 0.1 percent, and Germany's DAX gained 0.3 percent.
There was some good news about high-end retail: Michael Kors Holdings rose $2.06, or 5 percent, to $40.24 after reporting that its fourth-quarter profit more than tripled on strong demand grew for its luxury clothing and accessories. The company also boosted its earnings forecast for the quarter and the year.
Luxury spending has recovered from the recession faster than other consumer spending. Stocks of other upscale retailers, like Nordstrom, also rose.
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