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Stocks move higher; traders hope for ECB action
Stocks rise on Wall Street as hopes grow for European Central Bank action; Merck leads the Dow
By The Associated Press

NEW YORK (AP) Faced with Facebook, Starbucks and Mario Draghi, the market chose to focus on Draghi.

For a second day, the U.S. stock market powered higher on optimism generated by a pledge from the European Central Bank chief, who vowed Thursday to do whatever necessary to preserve the euro.

AN undercurrent of troubling signs slower economic growth, less consumer spending, and disappointing results from Facebook and Starbucks was simply shrugged off.

The Dow Jones industrial average climbed as high as 12,999.75 in early trading, almost within reach of the key milestone of 13,000. The last time the market closed above 13,000 was May 7, before worries about the European debt crisis re-exploded.

Draghi's remarks were influential because many investors fear that disaster would ensue if the 17 countries that use the euro were split apart. Weaker countries like Greece and Spain would likely plunge into an economic tailspin.

Keeping the euro zone intact, however, also depends heavily on the cooperation of stronger countries like Germany, which have footed much of the bill for bailing out weaker nations.

"Talk is cheap," said Michael Strauss, chief investment strategist and chief economist at the Commonfund investment firm in Connecticut. "While there's some euphoria over this, at the end of the day, is Spain going to still be in a recession? Yes. Is Greece still going to be in a recession? Yes. So I wouldn't get too carried away. "

Germany's finance minister, Wolfgang Schaeuble, followed Draghi's remarks with what amounted to a cautious endorsement. In a statement, Schaeuble said he welcomed Draghi's pledge to secure the euro. But he also made sure to place responsibility on the individual European countries, saying that they are responsible for implementing their own "necessary measures." He was referring to painful spending cuts that weaker countries like Greece have resisted and stronger countries like Germany have insisted on.

In the U.S., bond also trading reflected increased optimism among investors. The yield on the benchmark 10-year Treasury note jumped to 1.51 percent from 1.44 percent late Thursday. That means investors are shedding low-risk assets like U.S. government bonds and putting their money to work in other places, like the stock market.

The government reported that the U.S. economy grew just 1.5 percent in the second quarter, a paltry number that isn't enough to bring down the unemployment rate. But investors either didn't care or chose to instead pick out the glimmers of good news. For example, some investment firms had been forecasting an even more sluggish growth rate, of less than 1 percent.

At mid-morning, the Dow Jones industrial average was up 94 points to 12,982. Merck jumped more than 3 percent, rising $1.37 to $44.70, the biggest gain in the Dow average, after the drug maker beat analysts' forecasts for income and revenue.

The Standard & Poor's 500 rose 14 points to 1,374. The Nasdaq composite index was up 31 at 2,925.

Among other stocks making big moves:

Amazon jumped more than 5 percent, rising $12.16 to $232.17. The online retailer reported a steep drop in earnings but analysts were expecting the decline, which was caused mostly by costs related to buying a warehouse technology company.

Starbucks reported higher revenue and net income. But investors were disappointed that the company cut its outlook for the current quarter, worried over slowing traffic in June and July. It is also considering closing unprofitable stores in Europe. Starbucks fell more than 10 percent, losing $5.70 to $46.71.

Facebook, in its first quarter as a public company, reported a 32 percent jump in revenue. That might be welcome news at many companies, but it was lower than previous quarters. And revenue growth is especially important for a newly public company like Facebook, which didn't turn a profit but did attract investors who were willing to bet on fast-growing revenue. The stock dropped more than 14 percent, losing $3.85 to $23. It has not traded above its initial pricing of $38 since May 18, its first day as a public company.

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