Stocks rally on Europe, China?s economy

By msnbc.com news services

Slight improvements in Europe's troubled debt markets and China's economy were enough to send stocks higher Tuesday.

Debt auctions by Spain, Greece and Europe's bailout fund drew solid interest from investors, easing fears that recent credit-rating downgrades would prevent them from obtaining funds. The downgrades had threatened to increase borrowing costs and intensify the region's debt crisis.

Also, the Chinese government said earlier that its economy slowed less dramatically in the fourth quarter than analysts had expected.

There's so much money sitting in short-term accounts and earning zero return that even a shred of good news can jolt the market higher, said David Kelly, chief market strategist with J.P. Morgan Funds.

"The stock market is cheap, but cash and Treasurys are extremely expensive," Kelly said. "That's why even though people are busy taking money out of stocks and putting it into bond funds, they really should be doing the opposite."

The Dow Jones industrial average closed the day with a gain of?60?points, having moved as much as 152 points higher earlier in the session. The index came close to finishing the day above 12,500 for the first time since July 26.

The market was closed Monday for Martin Luther King Jr. Day.

Bank stocks were mixed after several of them reported earnings. Wells Fargo & Co. rose after a stronger lending business helped it beat Wall Street's fourth-quarter estimates. Citigroup Inc. and M&T Bank Corp. fell after their earnings fell short of estimates.

Carnival Corp. plunged after a cruise ship owned by one of its brands capsized off the coast of Italy, killing 11 passengers. Italian prosecutors are charging the captain with manslaughter, causing a shipwreck and abandoning his ship before all passengers were evacuated.

Royal Caribbean Cruises Ltd. Co. fell as analysts predicted ripple effects through the industry.

Overseas markets rose earlier Tuesday after Spain auctioned off billions in short-term debt at sharply lower interest rates, indicating strong demand for the nation's bonds. Spain's borrowing costs had spiked in recent weeks on fears it would be engulfed by the crisis and default on its debts.

Standard & Poor's downgraded Spain's credit rating on Friday. The strong demand at the auction suggested that investors took the downgrade in stride.

Greece also auctioned off short-term debt on Tuesday at a lower rate than it had been paying. The fund to bail out Greece and other troubled nations also raised money, despite a downgrade on Monday.

The bailout fund's credit rating is based on the ratings of the nations that contribute to it. It was downgraded because S&P had cut ratings for most of the nations that use the euro and back the fund.

Earlier, the Chinese government said its economic growth slowed to 8.9 percent in the fourth quarter. That was the lowest in two and a half years, but still better than the 8.7 percent predicted by analysts.

Chinese growth must stay strong to keep the global economy moving as Europe tips toward recession, said Brian Levitt, an economist with Oppenheimer Funds.

"Many emerging markets are more linked via exports to the Chinese market than to the European economy, so China becomes sort of the lynchpin economic activity across much of the world," he said.

The Associated Press contributed to this report.

Source: http://bottomline.msnbc.msn.com/_news/2012/01/17/10176227-stocks-rally-on-europe-chinas-economy

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