NEW YORK Investors bought stocks again on the latest reassuring news about the economy. This time, it was about European banks.
European regulators, who issued the results of what are called stress tests on the banks, said Friday that only a handful would struggle if the continents economy weakens. That helped send the Dow Jones industrial average up more than 100 points, which gave the index a two-day gain of more than 300.
The latest second-quarter earnings reports also convinced investors that the economic recovery is proceeding. So did announcements that General Electric Co. is raising its dividend and reports that French drug maker Sanofi-Aventis is interested in buying Genzyme Corp.
Investors initially were cautious about the stress tests, which measure how well banks would fare if government debt problems and the regions economy worsened. Europes debt issues have sent stocks falling worldwide since April amid concerns they could slow the global economic recovery.
There were some concerns in the market that the tests might not have been rigorous enough. Because the results were issued after the close of trading in Europe, it wont be known until Monday how investors on the continent react. And, if they react badly, if that will prompt U.S. investors to sell.
The tests showed that just seven of 91 European banks tested would fail. The European Union said the results should put to rest questions about the health of the continents financial sector.
Financial stocks, which had struggled early in the day, started to climb after the results were released at midday.
Brian Peardon, a wealth adviser at Harrison Financial Group, said there could be an initial, gut reaction to the results based on the headlines alone, but the full impact on the market wont come until next week because there is so much information to sort through.
It will take the weekend to digest whether theyre good or bad, Peardon said.
Some analysts were skeptical because there was little known about the criteria used to test the banks.
Theres obviously a lot of smoke and mirrors in these types of tests, said Albert Meyer, portfolio manager of the Mirzam Capital Appreciation Fund. They no doubt provide us with numbers that arent too alarming, even if they are correct.
Investors who have shuttled between buying and selling for weeks on uneven economic and earnings numbers have now had two consecutive days of upbeat news. On Thursday, stocks surged after Caterpillar Inc., UPS Inc. and other companies released results and forecasts that reassured investors who were disappointed by the first wave of second-quarter announcements. The latest reports, including results issued Friday by companies including Ford Motor Co. and Verizon Communications Inc., convinced investors that the economic recovery may not be as shaky as feared.
The Dow closed up 102.32, or 1 percent, at 10,424.62 after rising 201 on Thursday. The Standard & Poors 500 index rose 8.99, or 0.8 percent, to 1,102.66, while the Nasdaq composite index rose 23.58, or 1.1 percent, to 2,269.47.
Rising stocks outpaced those that fell by a 4 to 1 margin on the New York Stock Exchange, where volume came to 1.15 billion shares.
The major indexes had a winning week, rebounding from the previous weeks loss. The Dow rose 3.2 percent, the S&P 500 rose 3.5 percent and the Nasdaq picked up 4.2 percent.
Investors buying stocks took money out of Treasurys. That sent prices higher and interest rates lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3 percent from 2.94 percent late Thursday.
European markets already had closed by the time the test results were released, so investors there couldnt trade following Fridays announcement. German shares rose after a closely watched business climate index rose unexpectedly for the fifth consecutive month.
Germanys DAX index rose 0.4 percent, Britains FTSE 100 fell less than 0.1 percent, and Frances CAC-40 rose 0.2 percent.