Stocks added to their morning gains after an Associated Press report cited German opposition leaders saying, after a briefing with Chancellor Angela Merkel, that the euro-zone bailout fund’s firepower was set to be enhanced to more than 1 trillion euros ($1.39 trillion) through leverage.
But some analysts remained cautious over the European situation.
“There is still some hesitancy or tentativeness moving forward until at least later this week, until we get some answers out of Europe,” said Robert Pavlik, chief market strategist at Banyan Partners LLC.
“But you never know what will happen... the markets might sell off on the news, especially if the details of the plan are a little bit less than expected,” he said.
On Sunday, European leaders meeting in Brussels said they were making progress toward a broad plan to deal with the euro zone’s debt crisis, including recapitalizing European banks, but left the details for a second summit scheduled for Wednesday. Read more on EU summit.
“Equity traders have come back from the weekend in a cautiously optimistic mood,” wrote analyst Colin Cieszynski, analyst at CMC Markets Canada. “EU debt negotiations didn’t go off the rails over the weekend, and it appears that some progress may have even been made toward an agreement.”
The advance was also supported by data from China, after a preliminary HSBC monthly survey of manufacturing conditions in China climbed to a five-month high in October. The so-called flash PMI showed the sector in expansion versus its contraction in September. Read more on China flash PMI.
European markets climbed earlier in the day on hopes the region’s leadership may find a solution to the sovereign debt crisis.
Stocks have been highly sensitive to indications that European policy makers would come up with measures to prevent a sovereign debt default from triggering a Lehman Bros.-style financial shock, including by pumping more money into the region’s banks. Markets, particularly commodities, have also been on edge about whether inflation-fighting efforts in China could lead to a hard landing in that economy, spurring a global slowdown.
Crude-oil futures for December delivery CL1Z +3.67% jumped $3.03, or 3.5%, to $90.43 a barrel Monday, while gold prices GC1Z +1.03% extended Friday’s rebound, adding $16.60, or 1%, to $1,652.70 an ounce.
Leading Dow gainers, shares of Caterpillar Inc. CAT +5.51% advanced 6.1% after the equipment maker reported a jump in earnings, topping estimates, and guided analysts to the top of its range for full-year earnings per share. Read more on Caterpillar.
The strong results show “corporate earnings are still there [and that] companies can still make money in this economy,” Banyan Partners’ Pavlik said, but added that the strong earnings weren’t translating into new jobs.
Among other movers, shares of RightNow Technologies Inc. RNOW +19.26% jumped 19.2% on news that Oracle Corp. ORCL +1.59% will acquire the customer-service software developer. Oracle shares added 1.7%. Read more about the acquisition.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
Laura Mandaro is a MarketWatch editor, based in San Francisco.
