Tags: Wall Street

Stocks Rally After Mubarak Relinquishes Power

Friday, 11 Feb 2011 12:43 PM

News that Egypt's President Hosni Mubarak resigned sent stocks modestly higher around the world Friday. Investors were waiting to see if the unrest in Egypt might still spread to other countries.

Markets had been lower earlier Friday after Mubarak had tried to cling to office. The Dow Jones Industrial Average was down 49 points, then regained that ground and was up near 40 just before the close. Markets in Europe also recovered from losses and were modestly higher.

Investors have been concerned during the nearly three weeks of violence in Egypt that if the unrest spread to nearby oil producing countries, the supply of crude might be disrupted. That concern lingered Friday.

"If the contagion starts spreading and oil prices start spiking, it will lead to a volatile ride for the stock and bond prices in the coming months," said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group.

Egypt is not a major producer of oil, but it plays a key role in the industry because it controls the Suez Canal, a major route for oil tankers and cargo ships. Crude oil was trading higher earlier in the day, but fell $1.12 to $85.61 after the news about Mubarak came out.

The Dow rose 32.70, or 0.3 percent, to 12,261.99 in afternoon trading. The Standard & Poor's 500 Index rose 5.94, or 0.5 percent, to 1,327.81. The Nasdaq Composite Index rose 15.01, or 0.5 percent, to 2,805.46.

Bond prices rose. The yield on the 10-year Treasury note, which is used to help set interest rates on loans including mortgages, fell to 3.66 percent from late Thursday's 3.71 percent.

Stocks have generally been rising as traders watched the situation in Egypt but still kept buying. The market did have one big drop, on Jan. 28, when the Dow fell 166 points. But the Dow also made its first move past 12,000 since August 2008 while the violence continued.

Wael Ziada, head of Egypt research at EFG-Hermes, says questions will remain for the next few months about how stable the country is and "how the military will be ruling."

Traders were encouraged by U.S. economic news, a pickup in consumer sentiment. Economists said the University of Michigan's consumer sentiment index rose to 75.1 in February, from 74.2 in January. The index of current conditions rose to 86.8, its highest reading since January 2008.

Economists said they expect consumer confidence to continue to rise this year as hiring increases and financial situations improve. The next reading on consumer sending comes Tuesday, when the Commerce Department releases retail sales numbers for January.

Among big stock moves, Expedia plunged 17 percent after the online travel company said its earnings fell 30 percent due to higher expenses. Chipotle Mexican Grill rose 7 percent after its earnings soared 47 percent.

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