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Stocks Rally Sharply, Dow Closes Above 11,000

Monday, 26 Sep 2011 | 4:45 PM ET

Stocks closed near session highs in volatile trading Monday, led by financials and energy, amid hopes for coordinated action from euro zone policymakers to contain the region's debt crisis.

The Dow Jones Industrial Average soared 272.38 points, or 2.53 percent, to finish at 11,043.86, rallying above the psychologically-important 11,000 level. BofA and JPMorgan led the blue-chip gainers.

The S&P 500 jumped 26.52 points, or 2.33 percent, to close at 1,162.95. The Dow and S&P 500 posted their best gains in almost 3 weeks.

The tech-heavy Nasdaq rebounded 33.46 points, or 1.35 percent, to end at 2,516.69 after starting the session in the negative territory.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, slipped below 40.

All 10 S&P sectors gained, led by financials and energy.

Stocks advanced following news that a detailed plan to leverage money in the EFSF is in the works, according to a European official. The plan would use a portion of the money from the fund to shore up European bank capital, while another portion would be used as seed money for a European Investment Bank, according to the official.

“Right now, we have stability in the markets, but it’s not equilibrium and that’s where we’re losing traction in the stock market…it’s not sustainable for the long-term,” said Brian Battle, vice president of trading at Performance Trust Capital Partners.

“We have a lot of headlines this week but the two big things we’re watching is Germany’s vote on EFSF on Thursday and Congress as it is back in session,” added Battle.

European shares closed higherfollowing news that monetary policy officials in Europe have already started discussing the next steps they will take to ease the euro zone sovereign debt crisis, as policymakers work to finalize the EFSF.

Bank shares rallied amid hopes of a euro zone deal. Citigroup and JPMorgan climbed almost 6 percent each.

Regional banks were trading higher as well. First Horizon National jumped after Morgan Stanley raised its rating on the bank to "overweight" from "equalweight."

UBS also gained as the bank introduced a new CEOafter Oswald Gruebel resigned in the wake of a $2.3 billion rogue trading scandal.

Where Should you Invest on Rally?
Neil Hennessy, The Hennessy Funds, and Peter Coleman, JMP Securities, discuss how investors should be positioning themselves as major averages rally on Monday.

Techs were the biggest laggards for most of the day, but rebounded to finish in the positive territory. Still, Apple finished slightly lower after JPMorgan said the iPhone maker is cutting orders from suppliers of parts for its iPadby 25 percent.

And chipmakers posted a decline, including Taiwan Semi , Broadcom and Micron Tech .

Boeing jumped after the aircraft maker completed its contractual delivery of the first 787 Dreamliner jet to Japan's All Nippon Airways over the weekend.

Fellow Dow component Coca-Cola also rose after CEO Muhtar Kent said he plans to invest almost $3 billionin Russia over the next five years as part of its strategy to build its presence in big and fast-growing emerging markets.

Berkshire Hathaway announced it will launch a share buyback program following months of investors complaints the stock was undervalued. In a rare move, Warren Buffett's company said it would buy back both Class A and B shares at a premium of no more than 10 percent to book value per share.

Consol Energy soared to lead the S&P 500 gainers after the firm said it has sold a $193 million stake in its Marcellus Shale holdings in southwestern Pennsylvania and West Virginia.

Clorox fell to lead the S&P 500 laggards after billionaire investor Carl Icahn stepped back from his bid to take over the board of the chemical products maker.

Eastman Kodak plunged sharply after the company said it was borrowing $160 million against its credit line.

American Eagle Outfitters jumped after the teen apparel retailer's CEO bought a million shares of the company's stock.

Gold tumbled to settle below $1,600 an ounceas the greenback ralliedand investors flocked to cash amid global uncertainties.

On the economic front, new home sales slumped 2.3 percent to a seasonally adjusted 295,000-unit annual rate, according to the Commerce Department. The decline came in line with analysts' forecasts, according to a Reuters survey.

Other key housing reports are expected throughout the week, including the S&P/Case-Shiller home price index on Tuesday and pending home sales on Thursday.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap This Week:

TUESDAY: S&P/Case-Shiller home price index, consumer confidence, Fed's Lockhart speaks, 2-yr note auction; Earnings from Walgreens
WEDNESDAY: Weekly mortgage apps, durable goods orders, oil inventories, 5-yr note auction; Earnings from Darden Restaurants
THURSDAY: GDP, jobless claims, Fed's Rosengren speaks, corporate profits, pending home sales, 7-yr note auction, farm prices; Earnings from Micron
FRIDAY: Personal income & outlays, Chicago PMI, consumer sentiment, Fed's Bullard speaks

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