Europe’s leaders expressed their intentions to multiply the rescue fund by four times to one trillion euros while pushing Greece to allow for a 50-plus percent loss on their bond holdings. While the totality of the plan was not disclosed, it was enough to please the three major U.S. indexes for the day, with the financial sector shining especially bright during the session.
Financials were the second best performing sector on Wednesday as the final decision on how best to recapitalize the banks is anticipated within the next four days. The potential impact of a European debt crisis has been hanging over the U.S. markets for months and with a final decision in sight, investors are looking to snap up shares before what can be anticipated to be major gains in the aftermath of a conclusion.
Among the beneficiaries of the news was Bank of America (BAC), which added over 2 percent for the day. The long ailing bank is down over 50 percent YTD and while the European crisis is scarcely as worrisome in the short term as negative sentiments regarding new debit card charges and ongoing mortgage exposure, a resolution cools worries about long-term impact on the economy and by association Bank of America.
Bank of America was joined by Goldman Sachs (GS) which added more than 5 percent in trading. Recent earnings losses at the bank, the first since the depth of the recession, have sounded an alarm for investors and led to recent losses. Today, the investment outfit regained some of that value as a brighter economic outlook was considered a boon for Goldman. Beyond the Europe factor, Goldman was listed among firms that could potentially gain via the purchase of hemorrhaging financial institution, MF Global Holdings Ltd.
According to Richard Bove, an analyst at Rochdale Securities LLC the purchase of MF would help Goldman address its own problems of excess liquidity and bring the firm greater profit.
Credit card companies were also higher for the day with American Express Co. (AXP) and Visa climbing in trading. American Express may have risen both on revised analyst expectations for the annual economic growth and the decision for Bank of China to begin issuing their credit cards. Meanwhile, predicted growth for Visa, scheduled to report earnings after hours, helped drive shares up over 1 percent. Discover Financial Services (DFS) also rose sharply on broader optimism.