US stocks higher after Greece deal

The Dow Jones industrials rose seven points to close at 12,890

Published: 10:02pm, 9th February 2012
Updated: 12:23pm, 10th February 2012

The stock market finally got a deal in Greece, but it did not produce much of a rally.

US stocks rose on Thursday morning after Greece announced an agreement to cut costs and keep from defaulting on its debt next month, an event that could have shocked the world financial system.

But stocks dropped later in the morning and never returned to their highs for the day. Analysts cautioned that the market had expected the deal in Greece and warned that Europe still faced problems.

The Dow Jones industrial average finished up 6.51 points at 12,890.46. The Standard & Poor's 500 index rose 1.99 to 1,351.95. The Nasdaq composite index climbed 11.37 to 2,927.23.

Earlier in the day, the Dow was as high as 12,924.71, its highest level during a trading day since May 20, 2008. That was also the last day the average traded above 13,000.

In the afternoon, the S&P rose as high as 1,354.32, more than double its level on March 9 2009, the low for stocks during the Great Recession. It last closed at double the low last July. The Nasdaq is trading at its highest level since December 2000.

The markets have had a strong start this year, mostly because of optimism about the economy. The Dow has gained 5.5%, the S&P 7.5%.

The deal calls for Greece to make steep cuts in government jobs and spending. Greece's so-called troika of lenders - the European Union, the European Central Bank and the International Monetary Fund - insisted on the cuts.

The cuts are one condition of a 130 billion euro bailout for Greece, without which it cannot afford 14.5 billion euro worth of bond payments due by March 20. But the cuts will be hard to implement in a country that has grown used to profligate government spending. Workers are already protesting that job cuts and pay cuts have been too severe.

The country has missed other targets for reducing its debts. It also still has to persuade private investors to agree to losses on their holdings, which will make those investors less likely to buy Greek bonds in the future. And other European countries, notably Portugal and Italy, still have long-term debt that economists warn could be unsustainable.