The statement by European Central Bank president Mario Draghi unequivocally backing the euro sent the Dow Jones Industrial Average soaring to its highest gain in almost a month on Thursday, July 26. The advance was a broad one with seven stocks advancing for every three stocks declining.
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The statement gave the market exactly what it was looking for—specific commitment by European leaders to do whatever it takes to defend the euro. Equities rallied across global markets and the euro strengthened as a result of the announcement.
The reintroduction of possible intervention into European bond markets was a key factor in the rally. The S&P 500 also saw advances in all 10 industries the index represents. Equities also rose on an unexpected drop in unemployment claims even though equipment sales were off. Soft equipment sales may indicate a drop off in business during the second half of the year.
Laszlo Birinyi, president of Birinyi Associates, says the bull market
is still intact and that worries are overblown that their worst fears about the equities markets will come to pass. He predicts the S&P 500 will reach 1380 within the next few months and a continued rally from that point.