Easing Russia tensions spur Wall Street rally; bonds also gain

NEW YORK Fri Aug 8, 2014 4:33pm EDT

1 of 4. A Wall Street sign is pictured in the rain outside the New York Stock Exchange in New York June 9, 2014.

Credit: Reuters/Carlo Allegri/Files

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NEW YORK (Reuters) - Wall Street rallied on Friday after Russia said it ended military drills near Ukraine, soothing investor nerves over regional tensions, but bond yields fell in key markets worldwide after U.S. President Barack Obama authorized air strikes in Iraq.

U.S. equities extended gains in late trading, with major indexes hitting session highs. Russia's Defense Ministry said it had finished military exercises in southern Russia, which the United States had criticized.

"The active saber-rattling is probably over but the threat is still there and yet we’ve chosen to overlook this," said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh.

"The equity people definitely see the glass half full and the bond people see it half empty, and that is what we are seeing today is that fundamental split between the basic natures of the traders."

The Dow Jones industrial average .DJI rose 185.66 points or 1.13 percent, to 16,553.93, the S&P 500 .SPX gained 22.02 points or 1.15 percent, to 1,931.59 and the Nasdaq Composite .IXIC added 35.9 points or 0.83 percent, to 4,370.9.

The rally marked the best one day-performance for the Dow and S&P 500 since March 4 and spurred the major index to modest gains for the week, with the Dow and Nasdaq notching a 0.4 percent weekly gain and the S&P up 0.3 percent.

The benchmark 10-year U.S. Treasury note US10YT=RR was up 3/32, the yield at 2.424 percent. Air strikes in Iraq earlier drove U.S. yields to their lowest since June 2013 before price gains eased after the Russian statement and Germany's 10-year Bund fell to another record low, closing in on 1 percent.

Obama said in an address he authorized "targeted" strikes to protect the besieged Yazidi minority and U.S. personnel in Iraq. Hours later, U.S. aircraft bombed Islamic State artillery attacking Kurdish forces near Arbil, Iraq.

Equity markets rebounded from earlier losses, with the MSCI All World Index .MIWD00000PUS up 0.2 percent.

A broad index of European stocks .FTEU3 ended down 0.7 percent and Germany's DAX Index .GDAXI lost 0.3 percent, but was off the day's worst levels.

The intensifying risks in one of the world's biggest oil-producers jolted oil markets, at one point sending U.S. crude CLc1 up more than $1 to $98.45 a barrel and Brent LCOc1 to $106.39.

But oil prices trimmed gains. U.S. crude settled up 31 cents to $97.65, while Brent turned lower to settle down 42 cents at $105.02 as analysts said the strikes may lower the risk of supply disruptions. [O/R]

Fighting also resumed in Gaza between Palestinian militants and Israel.

The dollar .DXY was off its lows but remained 0.2 percent down, having hit a two-week low of 101.49 yen JPY= against the safe-haven Japanese currency.

(Editing by Nick Zieminski and James Dalgleish)

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Comments (5)
cautious123 wrote:
From the president who created this conflict through his lies and deceit, to the president who is too stupid and controlled by AIPAC and the neocons to get us out — the US has no competent leadership and is run by a pack of fools.

Aug 08, 2014 5:53am EDT  --  Report as abuse
AZreb wrote:
The best way to protect our diplomats is to get them OUT of Iraq – and the troops who are guarding them. Shred the paperwork – and who cares what happens to the buildings?

“Targeted” air strikes? Like the “targeted” air strikes of Israel that have hit 5 or 6 UN schools? There are humans doing to targeting, and humans make mistakes and all it will take is one mistaken target with civilian casualties (including children) in Iraq to bring down wrath on the US.

Humanitarian aid – good. Air strikes – war.

Aug 08, 2014 7:51am EDT  --  Report as abuse
GeeboH wrote:
Not again! Saddam never would have let this happen in the first place.

Aug 08, 2014 8:16am EDT  --  Report as abuse
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