(CSCO) Stock Market News for October 5, 2011 – Market News

A rush for buying technology and beaten-down stocks coupled with news that European finance ministers were backing up a plan to rescue banks led to a late-hour rally and sent benchmarks higher. The S&P 500 added 2.3% in the final hours after slumping 2.2% during the day and losing 20% from its April peak level.

Markets enjoyed an upward run in the final 45 minutes and the benchmarks managed to finish in the green. The Dow Jones Industrial Average (DJIA) shot up 345 points in the last hour, closing 1.4% higher at 10,808.71. The Standard & Poor 500 (S&P500) jumped 2.3% and settled at 1,123.95. The Nasdaq Composite Index gained nearly 3.0% to close the day at 2,404.82. The fear-gauge CBOE Volatility Index (VIX) slumped to trade around 41. However, it is still hovering at very high levels, reflecting the lingering concerns of investors. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were 13.1 billion shares, significantly higher than the year’s daily average of 8 billion shares. In fact, the trading session’s last half hour recorded 15% of the day’s composite volumes. On the NYSE, for every three stocks that gained, two moved lower.

Markets drew optimism from news of the European finance ministers working on ways to shore up banks. According to a Financial Times report, Olli Rehn, European Union Economic and Monetary Affairs Commissioner, said that there is an “increasingly shared view” that the continent is in dire need of coordinated action to tackle the debt concerns. At a meeting in Luxembourg, European finance ministers concluded an agreement on new economic governance rules for the euro zone. Olli Rehn said: “These are powerful tools for fundamentally changing the way the Economic and Monetary Union is governed …. These will enable us to ensure sustainable public finances, to pre-emptively address economic imbalances and to correct the looming problems before the risk spreads and the crisis is there…. Mark my words: I will not hesitate to fully apply the new rules with vigor from the first day these tools enter into force”.

Investor sentiment has been dampened by fears of a Greece debt default, which saw the markets suffering heavy blows for the past several days. Domestic recessionary fears had combined with European debt concerns with encouraging reports coming in only infrequently. It was reports of the proposed “special purpose vehicle”, designed to boost the flagging European economy that had somewhat alleviated the debt fears. This vehicle plans to issue bonds to investors and utilize the proceeds to purchase sovereign debt of troubled European nations. The plan seeks to allay the concerns of troubled nations and European banks alike, as the “special purpose vehicle” will seek a loan from the European Central Bank using the issued bonds.

Yesterday’s developments in Europe added to the buying frenzy that had already set in as investors lined up to add technology and beaten down stocks to their portfolios. Consequently, International Business Machines Corp. (NYSE:IBM), Hewlett-Packard Company (NYSE:HPQ), Oracle Corp. (NASDAQ:ORCL), Microsoft Corporation (NASDAQ:MSFT), Cisco Systems, Inc. (NASDAQ:CSCO) and Intel Corporation (NASDAQ:INTC) gained 0.9%, 3.7%, 2.7%, 3.3%, 3.0% and 2.9%, respectively.

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