European debt deal sends markets higher

NEW YORK — What’s good for Europe is good for markets.

News that European leaders were drawing up a new rescue plan for Greece and taking a broader approach to dealing with Europe’s debt troubles drove markets higher Thursday.

The Dow rose 152 points. Oil crossed above $100 for the first time since June. The euro rose against the dollar, and U.S. government bonds fell.

At an emergency meeting in Brussels, European officials agreed to give Greece a rescue package worth 109 billion euros ($155 billion). They also plan to lower interest rates and lengthen payback terms for loans to Greece, as well as those made to Ireland and Portugal.

European officials gave new powers to the region’s bailout fund, allowing it to provide credit to struggling countries before a crisis flares up. German Chancellor Angela Merkel said European officials want to tackle the “root” of the debt crisis.

Worries about Europe’s debt crisis have been hanging over financial markets for months. A default by Greece or another deeply indebted country could freeze debt markets and cause other damage to Europe’s banking system.

The Dow Jones industrial average rose 152.50 points, or 1.2 percent, to close at 12,724.41.

The S&P 500 index rose 17.96 points, or 1.4 percent, to 1,343.80. The Nasdaq composite index rose 20.20 points, or 0.7 percent, to 2,834.43.

The yield on the 10-year Treasury jumped to 3.00 percent, up from 2.93 percent late Wednesday. The euro rose two cents to $1.44.

Europe’s debt crisis and the debate over raising the U.S. government’s borrowing limit have kept investors on edge over the past two weeks. The Dow and S&P have flip-flopped between gains and losses over the past eight trading days.

Markets have overreacted to signs of progress in the European debt crisis before.

In late June, stocks soared when French banks agreed to accept slower repayment of loans to Greece. Markets rose again two days later after Greek lawmakers passed an austerity bill, a necessary step before the country could receive a loan installment. Each rally has been short-lived.

But this deal is more comprehensive. “This is the first serious effort to address Greece’s problems,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. LeBas said the 110 billion euro loan package arranged last year by the European Union and International Monetary Fund just piled more loans on top of the debt Greece already owed.

Bank stocks were broadly higher. A fix for Europe’s debt trouble would remove a threat to banks. Morgan Stanley jumped 11 percent. The investment bank’s quarterly loss was much smaller than analysts expected, thanks to an increase in trading revenues.

Of the 30 banks that have reported earnings so far, 24 have surpassed analysts’ estimates, according to research by Keefe Bruyette & Woods.

Technology stocks trailed the rest of the market. Intel Corp. slipped 1 percent, the only company in the Dow average that dropped. The chip maker said it expects weaker PC sales for the rest of the year as people and companies choose to buy tablet computers instead.

Express Scripts said it would buy Medco Health Solutions for $29.1 billion. The merger would combine the largest U.S. pharmacy benefits managers. Medco’s stock rose 14 percent and Express Scripts gained 5 percent.

Stronger earnings pushed the stocks of Union Pacific Corp. and Philip Morris International up more than 4 percent. The cigarette maker also increased its full-year earnings forecast. Union Pacific’s profit increased 10 percent thanks to higher shipping prices and a pickup in the number of carloads it carries.

Four stocks rose for every one that fell on the New York Stock Exchange. Volume was higher than average at 4.4 billion shares.