June 6 - Wall Street enjoys its best day of 2012 as optimistic investors bet the European debt crisis has worsened enough to prompt euro zone governments to come up with a meaningful rescue plan, but recent history shows that optimism can quickly turn to gloom. Conway G. Gittens reports.
The Dow is back in the money for the year with investors betting the European crisis stinks enough to force more stimulus. In the biggest one-day gain of the year: The Dow surged 286 points, the S&P 500 rallied 29 points and the Nasdaq jumped 66. Investors were also willing to snap-up bargains after the recent selling frenzy. The Federal Reserve's latest summary of economic conditions describes economic growth as moderate and hiring as steady or increasing slightly through late-May; helping Wall Street scale back exaggerated fears of a double-dip U.S. recession. Russell Investments Chief Market Strategist Stephen Wood: SOUNDBITE: STEPHEN WOOD, CHIEF MARKET STRATEGIST, RUSSELL INVESTMENTS (ENGLISH) SAYING: "Markets tend to over-react. They tend to over-price but longer term I think the U.S. economy appears to be doing okay. We are the cleanest dirty shirt in the closet. We are not bad compared to Europe." A message Federal Reserve Chairman Ben Bernanke may deliver to lawmakers on Thursday. But Europe is still a major threat. Separate phone calls between U.S. President Barack Obama, German Chancellor Angela Merkel, and Italy's Mario Monti as leaders try to forge a crisis plan that will stick. Signs to rescue Spain's troubled banks were welcomed, but that goodwill can quickly be erased. SOUNDBITE: STEPHEN WOOD, CHIEF MARKET STRATEGIST, RUSSELL INVESTMENTS (ENGLISH) SAYING: "The politicians in Europe are doing a very effective job at scaring the world's investors and making a mess of this in here. So they are going to have to make some very difficult decisions very, very soon to not only deal with their problems but also to calm down the investment world." The European Central Bank is leaving those tasks to the politicians, keeping interest rates at 1 percent. But European investors are still betting on some help from somewhere, prompting a more than 2 percent upswing in major stock markets. Conway Gittens, Reuters