U.S. stocks popped higher Friday after Egyptian president Hosni Mubarak stepped down from power, sparking celebrations in Cairo and relief among investors.
The Dow Jones Industrial Average rose 34 points, or 0.3%, to 12263.
The Nasdaq Composite rose 0.3% to 2799. The Standard & Poor’s 500-stock index gained 0.4% to 1327, led by its financial sector.
The market reversed early morning losses after the Egyptian vice president said on State TV that Mubarak will step down, delegating power to Egypt’s army, on the 18th day of protests in Cairo. The announcement sparked celebrations by thousands of protesters that have been calling for the end of the regime.
Traders said the market’s initial jump, which quickly pared, would likely moderate in the day, but left many relieved that the president’s departure was likely to defuse a potentially-violent situation.
“There was a lot of concern over what happens over the weekend–does it get violent?” said Jay Suskind, senior vice president at Duncan-Williams. But the market, which has shown a muted reaction to turmoil in Egypt, is unlikely to surge significantly higher, he said. “You’ll see a nice rally here and then people say, ‘OK, that’s it for the day.'”
Investors said the unease over Egypt may in fact have been helping prop up U.S. stocks as investors transfer their funds from emerging markets, whose risks are being highlighted.
“The problems in Egypt are causing money to come back to the U.S. market,” said John Apruzzese, chief investment officer at Evercore Wealth Management. Even apart from Egypt’s unrest, in other emerging markets, “the inflation problem is upon them and a lot of the central banks have begun increasing interest rates,” he said.
Financials led the market Friday as mortgage insurers surged on a government proposal to shrink the size of the Federal Housing Administration, a government-run competitor to the private mortgage insurance industry. Shares of Genworth Financial jumped 5.9%, MGIC Investment surged 11% and PMI Group climbed 5.9%.
The Obama administration’s proposal also included plans for winding down mortgage giants Fannie Mae and Freddie Mac. The steps are likely to mean higher borrowing costs and more limited access to home loans for consumers. Homebuilding company Lennar fell 0.9%, while D.R. Horton shed 0.2%.
Meanwhile, U.S.-listed shares of Nokia tumbled 13% after the handset maker said it will adopt Windows Phone as its main smartphone platform, as part of a broad strategic partnership with Microsoft. Nokia offered no guidance for next year or new products, and said 2011 and 2012 are likely to be transition years. Analysts were also concerned that Nokia didn’t cut its guidance for research and development costs as a result of the alliance with Microsoft, which most analysts had expected. Meanwhile, shares of Microsoft fell 0.6%.
Ford Motor rose 3% after saying it will cut its debt load by another $3 billion.
In Friday’s economic data, the U.S. trade gap widened in December, with the full-year trade gap registering its biggest percentage increase in 10 years on the back of a record shortfall in trade with China, the Commerce Department said. The U.S. deficit in international trade of goods and services increased 5.9% to $40.58 billion from a slightly revised $38.32 billion the month before, topping economists’ estimates for a $40.5 billion shortfall.
Separately, the Reuters/University of Michigan consumer sentiment reading for mid-February edged up to 75.1, slightly better than the 75.0 expected by economists.
The U.S. dollar strengthened against the euro and the yen. The euro was trading recently at $1.3549, down from $1.3594 late Thursday in New York. Demand for U.S. Treasurys rose, pushing yield on the 10-year note down to 3.63%. Crude-oil prices declined, while gold futures edged up.
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