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Stocks exploded out of the gates and they never looked back.First the scoreboard:
Dow: 12,880, +277.8, +2.2%
S&P 500: 1,362, +33.1, +2.4%
NASDAQ: 2,935, +85.5, +3.0%
And now the top stories:
- Late last night at the EU leaders’ summit in Brussels, officials announced a new bank recapitalization plan that ignited the global markets. The new plan would allow existing bailout funds to be used to directly recapitalize the most troubled banks, something that German Chancellor Angela Merkel had resisted staunchly. Here’s A 60-Second Guide To The EU Summit Breakthrough >
- Basically, this structure is intended to help lower the staggering borrowing costs faced by the Spanish and Italian governments. Indeed, those borrowing costs plummeted this morning. “The ECB’s balance sheet has been opened up via the ESM to directly recapitalize the European banking system. And that my friends is a game changer!!” wrote Jefferies Strategist David Zervos.
- Despite the hugely favourable response from the stock markets, the new plan has plenty of critics including Morgan Stanley who argues it doesn’t go far enough and Bank of New York who pointed out that the plan doesn’t do anything for Greece. Gluskin Sheff economist David Rosenberg noted the lack of details, and he thinks that the markets have set themselves up for disappointment. “We have been here before with initial post-summit euphoric behaviour followed by disappointment once investors realise that these vague policy pronouncements have less meat on the bone than was initially thought,” wrote Rosenberg.
- Amidst all this excitement, oil prices surged 9.4 per cent to $84.95. This was the biggest one day gain in three years.
- There were a couple of earnings announcements worth noting. KB Homes announced a Q2 net loss of just $0.31, which was much smaller than what analysts expected. Net orders jumped 18 per cent. However, CEO Jeffrey Mezger wasn’t ready to commit to calling a bottom in housing. Shares jumped by 14 per cent.
- Gunmaker Smith & Wesson also had a monster quarter with sales surging 28 per cent. Ever since President Obama was elected, firearms sales have been hot on concerns that he would push through policies that would limit people’s ability to get their guns. These 6 Slides From Smith & Wesson Show America’s Obsession With Guns >
- Don’t Miss: These 10 Stocks Have Been Getting Destroyed This Year >