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Stocks surge on European debt deal, GDP growth

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The Dow Jones industrial average surged nearly 340 points Thursday after European leaders agreed on a deal to slash Greece's debt load and prevent the debt crisis there from engulfing larger countries like Italy. The Standard & Poor's 500 index is close to having its best month since 1974.

Commodities and Treasury yields rose as investors took on more risk. The euro rose sharply against the dollar.

Europe's sweeping agreement, reached after an all-night summit meeting, is aimed at preventing the Greek government's inability to pay its debt from escalating into another financial crisis like the one that happened in September 2008 after the collapse of Lehman Brothers.

Banks agreed to take 50 percent losses on the Greek bonds they hold. Europe will also strengthen a financial rescue fund to protect the region's banks and other struggling European countries such as Italy and Portugal.

"This seems to set aside the worries that there would be a massive contagion over there that would have brought everything down with it," said Mark Lamkin, head of Lamkin Wealth Management.

Stronger U.S. economic growth and corporate earnings also drove markets higher. The government reported Thursday that the economy grew at a 2.5 percent annual rate from July through September on stronger consumer spending and business investment. That was nearly double the 1.3 percent growth in the previous quarter.

The Dow Jones industrial average soared 339 points, or 2.9 percent, to 12,208. All 30 stocks in the Dow rose, led by aluminum maker Alcoa Inc. with a 10-percent gain. Commodities prices and Treasury yields also rose as investors took on more risk. The euro rose sharply against the dollar.

The Dow hasn't closed above 12,000 since Aug. 1 and is up 12.5 percent for the month. With only two full days of trading left in October, the Dow could have its biggest monthly gain since January 1987. The Dow's jump was its largest one-day point gain since a 423 point rise Aug. 11th.

The S&P 500 rose 42, or 3.4 percent, to 1,284. The gain turned the S&P positive for the year for the first time since Aug. 3, just before the U.S. government's debt was downgraded. The index is up 13.8 percent for the month, its best performance since a 16.3-percent gain in October 1974.

The Dow and S&P have both fallen for the previous five months.

The NASDAQ composite jumped 88, or 3.3 percent, to 2,738.

Small company stocks rose more than the broader market. That's a sign investors were more comfortable holding assets perceived as being risky but also more likely to appreciate in a strong economy. The Russell 2000 index jumped 5.8 percent.

Raw materials producers, banks and stocks in other industries that depend on a strong economy for profit growth led the way. Copper jumped 5.8 percent to $3.69 a pound and crude oil jumped 4.2 percent to $93.96 a barrel.

The euro rose sharply, to $1.42, as confidence in Europe's financial system grew. The euro was worth $1.39 late Wednesday and had been as low as $1.32 on Oct. 3. European stock indexes also soared. France's CAC-40 rose 6.3 percent and Germany's DAX jumped 6.1 percent.

Investors sold U.S. Treasury notes and bonds, an indication they were moving away from safer investments. The yield on the 10-year Treasury note, which moves in the opposite direction of its price, rose to 2.39 percent from 2.21 percent late Wednesday.

European leaders still have to finalize the details of their latest plan. French President Nicolas Sarkozy spoke with Chinese President Hu Jintao amid hopes that countries with lots of cash like China can contribute to the European rescue.

Past attempts to contain Europe's two-year debt crisis have proved insufficient. Greece has been surviving on rescue loans since May 2010. In July, creditors agreed to take some losses on their Greek bonds, but that wasn't enough to fix the problem.

Some analysts cautioned that Europe's problems remained unsolved. "The market keeps on thinking that it's put Europe's problems to bed, but it's like putting a three-year old to bed: you might put it there but it won't stay there," said David Kelley, chief market strategist at J.P. Morgan Funds. Kelly said that Europe's debt problems will remain an issue until the economies of struggling nations like Greece and Portugal grow again.

Worries about Europe's debt crisis and a weak U.S. economy dragged the S&P 500 down 19.4 percent between April 29 and Oct. 3. That put it on the cusp of what's called a bear market, which is a 20 percent decline.

Since then, there have been a number of more encouraging signs on the U.S. economy. Despite the jitters over Europe, many large U.S. companies have been reporting strong profit growth in the third quarter.

Dow Chemical rose 9.4 percent after its profit last quarter rose 59 percent on strong sales growth from Latin America. Occidental Petroleum Corp. jumped 10 percent after reporting a 50 percent surge in income.

Citrix Systems Inc. rose 17 percent. The technology company's revenue rose 20 percent last quarter, and it forecast growth of up to 13 percent for 2012. Akamai Technologies Inc., whose products help speed the delivery of online content, jumped 17 percent after the company reported earnings that beat analysts' expectations.

Avon Products Inc. fell 17 percent, the most in the S&P 500, after the company said the Securities and Exchange Commission is investigating its contacts with financial analysts and Avon's own probe into bribery in China and other countries.

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  1. Socialized medicine works great for white people in Scandanavia. It works well in Costa Rica for a population that is partly white and partly mestizo. I don't really see Obamacare as something aimed against whites. I think that is a Republican canard designed to elicit support from white people for republican candidates who don't care about them any more than democrats care about the non-whites they pander to with their phony maneuvers. But what is different between Costa Rica nd the Scandanavian nations on one hand and the US on the other? SIZE. Maybe the US is just too damn big. Maybe it just needs to be divided into smaller self governing pieces like when the old Holy Roman Empire was dismantled. Maybe we are always trying the same set of solutions for different kinds of people as if we were all the same. Oh-- I know-- that is liberal dogma, that we are all the same. Which is the most idiotic American notion going right back to the propaganda of 1776. All men are different and their differences are myriad and that which is different is not equal. The state which pretends men are all the same is going to force men to be the same. That is what America does here, that is what we do in our stupid overseas wars, that is how we destroy true diversity and true difference, and we are all as different groups of folks, feeling the pains of how capitalism is grinding us down into equally insignificant proletarian microconsumers with no other identity whether we like it or not. And the Marxists had this much right about the War of Independence: it was fundamentally a war of capitalist against feudal systems. America has been about big money since day one and whatever gets in the way is crushed. Health care is just another market and Obamacare, to the extent that it Rationalizes and makes more uniform a market which should actually be really different in nature and delivery from place to place-- well that will serve the interests of the biggest capitalist stakeholders in health care which is not Walmart for Gosh Sakes it is the INSURANCE INDUSTRY. CUI BONO Obamacare? The insurance industry. So republicans drop the delusion pro capitalist scales from your eyes this has almost nothing to do with race or "socialism" it has to do mostly with what the INSURANCE INDUSTRY wants to have happen in order to make their lives and profits easier.

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