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Stocks surge after euro zone agreement

Traders work on the floor of the New York Stock Exchange.
Traders work on the floor of the New York Stock Exchange.Brendan Mcdermid / REUTERS

Wall Street surged at Friday’s open after euro zone leaders agreed to allow rescue funds to be used to stabilize the region's banks.
Details of the agreement, which includes the creation of a single supervisory body for euro area banks, remain to be worked out.

Still, Italian and Spanish borrowing costs fell as market expectation for any action during a two-day European Union summit had all but vanished.

"We've gotten used to being underwhelmed by the outcomes, so with little to no expectations for success, the fact that it appears we are going to get something substantial is a real important positive for the market in the near term," said Art Hogan, managing director of Lazard Capital Markets in New York.

"It's inching closer to a banking union and the closer we get to a banking union would put (the EU) well on the road to a fiscal union."

The Dow Jones industrial average was lately up over 180 points.

Financial stocks could attract the most buyers in U.S. markets as the risk of exposure to their European peers diminishes.

A more than 1 percent jump in the euro against the U.S. dollar could entice investors into commodity-related sectors like basic materials and energy. The Select Sector Energy SPDR added 2 percent.

Equities and other risky assets have recently been weighed by concerns that stubbornly high borrowing costs in Spain and Italy could force the fourth- and third-largest economies in the bloc to seek bailouts.

Trading could be volatile and see higher volumes as managers square positions ahead of the end of the second quarter. The outperformance of bonds in the past three months could trigger inflows into stocks and extend the expected rally.

In economic news, a report showed consumer spending was flat in May for the first time in five months as Americans eased off on vehicle purchases amid tepid wage growth, but subsiding inflation pressures should keep demand supported.

The Commerce Department said April's consumer spending was revised down to show only a 0.1 percent rise instead of the previously reported 0.3 percent gain.

Weak consumer spending in May also reflected tepid sales at service stations as the pump price of gasoline fell from lofty levels early in the year.

Hospitals and insurers providing Medicaid plans for the poor were the main corporate winners from the U.S. Supreme Court's decision Thursday to uphold President Barack Obama's Affordable Care Act, as they prepare to see an influx of customers with no prior access to healthcare.

U.S.-traded shares of Research in Motion tumbled in the wake of the company's decision Thursday to delay the make-or-break launch of its next-generation BlackBerry phones until next year.

Nike shares dropped one day after the world's largest sportswear maker missed quarterly profit estimates for the first time in at least two years.

Shares of KB Homes rallied after the fifth-largest U.S. homebuilder reported a narrower second-quarter loss, helped by higher sale prices and net orders.

Reuters contributed to this report.