Stocks jump on hopes for Greece debt rescue

The Dow Jones industrial average jumped back above 10,000 on hope that a resolution was near for Greece's debt crisis.

The Dow rose 150 points Tuesday, a day after closing below 10,000 for the first time in three months. The major indexes all gained more than 1 percent. Treasury prices slid as demand for safer investments fell.

Global markets bounced back on reports that plans are being developed in the European Union to rescue Greece. That raised hopes that policymakers will take bigger steps to contain debt troubles in other weak European economies including Portugal and Spain.

Though Greece's economy is small, that country's yawning budget gaps were undermining faith in the euro, Europe's common currency. Investors also believed that other countries might have trouble raising money in debt markets, which would hamper efforts to get their economies going again.

World stock markets have been tumbling in recent weeks on concerns that debt problems would spread. The euro is still down about 5 percent for the year, but rose for a second day against the dollar as the outlook improved for Greece.

Greece took steps Tuesday to calm markets, pledging to slash spending and raise fuel taxes.

The European debt problems are the latest obstacle to trip up the stock market after 10 months of steep gains. Stocks began retreating in mid-January after China said it would try to control its economy to avoid speculative bubbles. Things got worse when President Barack Obama announced plans to curb trading by large financial institutions.

"There's some euphoria that maybe it's not going to be blowing up," said Erik Davidson, managing director of investments for Wells Fargo Private Bank in Carmel, Calif., referring to easing fears over Greece. Davidson said some of the market's slide had been over concern that stocks had risen too far. The problems in Greece provided a handy excuse to sell, he said.

Meanwhile, the Dow also got a boost from Morgan Stanley's upgrade to shares of Caterpillar Inc. It was Morgan's first upbeat take on the stock in three years. A cautious forecast from the equipment maker hurt stocks late last month.

The Dow rose 150.25, or 1.5 percent, to 10,058.64, its steepest percentage gain since Nov. 9. The broader Standard & Poor's 500 index rose 13.78, or 1.3 percent, to 1,070.52, while the Nasdaq composite index rose 24.82, or 1.2 percent, to 2,150.87.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.65 percent from 3.57 percent late Monday.

Stocks have become more volatile in recent weeks on concern about the strength of a global economic recovery. The Dow fell almost 104 points Monday and has posted triple-digit moves in 11 of the last 17 trading days. The index has retreated 6.2 percent since hitting a 15-month high in the middle of January.

The easing worries about Greece came on scattered reports about plans for a rescue. Even if the country's financial wounds are bandaged, however, investors will still face questions about other strapped European countries.

"We can't look at Greece in isolation," said Robert Froehlich, senior managing director at Hartford Financial Services. He added that the market's reaction to Greece's troubles was overblown and that he doesn't expect the country to default on its debt.

Froehlich said as concern quiets about Europe, investors will be able to pay more attention to the gains in earnings and revenue that most companies in the S&P 500 index have been reporting for the past month.

"I would've been much more concerned if the market was selling off in the face of bad earnings," he said.

The market's latest leap higher illustrates how reliant investors around the world are on soothing words from policymakers. In the U.S., stocks have barreled higher for nearly a year because the Federal Reserve has pledged to hold interest rates low to help revive the economy. The flow of cheap cash has perhaps been the biggest driver of the market as investors look for places to stick their money.

Analysts are asking how markets will fare as the Fed dismantles some of its emergency support programs for the economy, as it has started to do. There are concerns, for example, that home loan rates will rise will rise as the Fed ends a program to purchase mortgage debt to drive up demand.

"It's sort of like last call at the bar," Davidson said. "People have to start to look what the world is going to look like without being awash in liquidity."

In other trading, crude oil rose $1.86 to settle at $73.75 per barrel on the New York Mercantile Exchange. Heating oil prices jumped as a snow storm expected to bring heavy snow moved toward the East Coast. Gold rose.

Caterpillar was the biggest gainer among the 30 stocks that make up the Dow. The stock rose $2.75, or 5.4 percent, to $53.53.

Coca-Cola Co. reported fourth-quarter profit that matched analysts expectations. Its revenue topped forecasts as sales rose globally. Coca-Cola rose $1.36, or 2.6 percent, to $54.01.

More than three stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 5.2 billion shares compared with 4.2 billion Monday.

The Russell 2000 index of smaller companies rose 8.68, or 1.5 percent, to 595.17.

Overseas, Britain's FTSE 100 rose 0.4 percent, Germany's DAX index and France's CAC-40 each rose 0.2 percent. Japan's Nikkei stock average fell 0.2 percent.