US stocks rally ahead of Greek vote

NEW YORK: US stocks rallied on Tuesday amid hopes that Greece's government would survive a confidence vote, a crucial first step in defusing the country's debt crisis and stabilizing Europe's finances.

The Dow Jones Industrial Average gained 109.63 points (0.91 percent) to close at 12,190.01.

The broader S&P 500 climbed 17.16 points (1.34 percent) to 1,295.52, while the tech-heavy Nasdaq Composite surged 57.60 points (2.19 percent) to 2,687.26.

Inestors were optimistic about the situation in Greece, where the government of Prime Minister George Papandreou was facing a late-night confidence vote that had the future of Europe's finances hanging in the balance.

"The market is making a bet that the confidence vote will be positive for the government and that we will not wake up (tomorrow) with a catastrophe," said Gregori Volokhine of Meeschaert Capital Markets.

If it survives the vote, Papandreou's government will press ahead with plans for a deeply unpopular package of austerity cuts needed to satisfy the International Monetary Fund and eurozone finance ministers.

The Dow has risen for four straight days amid optimism that Europ and the IMF will succeed in their plan to prevent a Greek default, which could have potentially devastating consequences for Europe's banks.

Caterpillar, whose stock is seen as highly sensitive to economic news, was the strongest performer on the Dow's roster of 30 blue-chip stocks, surging 3.3 percent on Tuesday.

Besides the situation in Greece, markets were also closely watching a key meeting of the Federal Open Market Committee, the body within the Federal Reserve that sets interest rates.

The FOMC began its two-day meeting on Tuesday, and on Wednesday it is expected to announce it will allow its $600 billion asset purchase program to expire as scheduled at the end of June.

In a sign that the US economy remains weak, the National Association of Realtors said in a monthly report that existing-home sales declined 3.8 percent in May from April.

Shares of Encana fell 1.7 percent after the Canadian energy giant announced that it was ending talks with China's state-owned PetroChina on a joint venture to develop a major shale gas project.

Bond prices fell. The yield on the 10-year US Treasury note rose to 2.98 percent from 2.96 percent on Monday, while that on the 30-year bond climbed to 4.22 percent from 4.20 percent.

Bond prices and yields move in opposite directions.

Copyright AFP (Agence France-Presse), 2011