Indexes on Wall Street followed European shares higher on Monday after a brutal close to the previous week. European markets rose despite a downgrade of Ireland’s public debt.
The Dow Jones industrial average tumbled 261 points on Friday as traders became concerned that future revenue at big banks like Citigroup and Bank of America could be hurt by new financial regulations and ongoing volatility in the market.
But in early trading on Monday, the Dow rose 68.57 points, or 0.68 percent. The broader Standard & Poor’s 500-stock index rose 7.51 points, or 0.71 percent, while the technology heavy Nasdaq 100 index rose 18.17 points, or 0.83 percent.
Bond prices dipped. The yield on the benchmark 10-year Treasury note rose to 2.94 percent from 2.93 percent late Friday.
More insight into the banking sector will come this week when Goldman Sachs and Morgan Stanley report results. As two of the largest investment banks, they could be facing the biggest effects of the recently passed financial regulation overhaul. The new rules could restrict the types of trading the banks can do, which would reduce revenue and profitability.
The increasingly troubled outlook for the United States has begun to overshadow fears from Europe’s government debt woes, as markets seem to feel the debt crisis has eased ahead of the release of bank stress test results this week.
In London, the FTSE 100 was up 0.53 percent, or 27.14 points, and the DAX in Frankfurt rose 0.49 percent. The CAC 40 in Paris was 0.62 percent higher.
Asian indexes mostly closed lower.
Earnings and corporate outlooks will likely be the primary driver of trading again this week with only a few economic reports scheduled. Reports in housing starts and existing home sales, as well as weekly jobless claims data, are expected later in the week.
New earnings continue to show that second-quarter profits are exceeding expectations, but signs of growth are not necessarily strong.
Profit for Hasbro rose 11 percent as the toy maker cut spending, but sales continue to slow. Halliburton’s earnings rose 83 percent because of an increase in natural gas drilling. But the company is likely to face future expenses as one of the companies connected to the BP oil spill in the Gulf of Mexico.
Two technology companies, IBM and Texas Instruments, report after the market closes.
Aside from the weak jobs market, the housing sector has been a drag on a rebound. Home sales got an assist earlier this year because of a home-buyer tax credit. But since that expired at the end of April, home sales have weakened. That has added to questions about whether of the pace of a recovery can pick back up in the coming quarters.
Economists predict both housing starts and sales of previously occupied homes fell again last month.
Stocks have also struggled since government incentives and stimulus measures ended early this year. The Dow has dropped 10 percent since hitting its high for the year on April 26. In Europe, the recovery from Friday’s sharp losses came despite a one-notch downgrade by Moody’s of Ireland’s public debt. The ratings agency cited a weak growth outlook, high debt levels and large banking liabilities. In another reminder of Europe’s debt crisis, officials from the International Monetary Fund and the European Union said they had suspended talks of another loan for Hungary.
Investors looked past the reports, bidding the euro up to $1.2966 from $1.2947 in New York late Friday.
Markets will be looking forward to the publication on Friday of the results of stress tests of European Union banks. The tests simulated how the region’s 91 biggest lenders would fare if the economy worsened sharply.
“Although several European governments have suggested that the banks in their countries will pass the tests there is still a considerable event risk surrounding the announcement,” an analyst at Crédit Agricole, Mitul Kotecha, said.
He said much would depend on how rigorous the tests were perceived to be.
In Asia, most indexes closed lower to make up for last week’s losses on Wall Street. Hong Kong’s Hang Seng index shed 159.21 points, or 0.8 percent, to close at 20,090.95. Seoul’s Kospi closed 0.4 percent down at 1,731.95.
Markets in Japan were closed for a national holiday.
The Shanghai benchmark, however, rose — gaining 2.1 percent to 2,475.42 — on speculation that the Chinese government was committed to supporting the Agricultural Bank of China’s initial public offering to prevent it from dropping below its offer price.
