Markets surge on news of Europe’s rescue package

Financial markets surged on Thursday after European leaders announced a new rescue package to tackle their debt crisis.

Overnight on Wednesday, privately owned banks agreed to take a 50 percent “haircut,” or loss, on their Greek bond holdings and Europe’s leaders said they would expand Europe’s main bailout fund to 1 trillion euros (U.S. $1.4 trillion).

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The Dow Jones industrial average rose 339.51 points, or 2.86 percent, to close at 12,208.55, Reuters reports. The Nasdaq composite index increased 87.96 points, or 3.32 percent, to close at 2,738.63. The Standard & Poor’s 500 index jumped 42.59 points, or 3.43 percent, to end the day at 1,284.59. This was the S&P’s highest level in almost three months, Bloomberg News reports.

According to the New York Times:

It was a marked turn-around from just a few weeks ago, when anxiety over the European debt crisis helped push Wall Street to the brink of a bear market. On Oct. 3, the S.&P. 500 was down 19.4 percent from its high on April 29.

Stocks closed up as much as 6 percent in Europe, the New York Times reports.

"This is not a magic elixir. It's a very good start and certainly more than people had expected," Bill O'Neill, partner at commodity investment firm LOGIC Advisors, told Reuters.

“The most important outcome is it seems to remove from the table fears of an imminent bank crisis,” David Joy, chief market strategist for Ameriprise Financial, told the New York Times. “What this does is it buys Europe time to do the hard work of initiating structural reforms.”

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