Why the Dow Is Up More Than 100 Points

Stocks are up broadly today following positive news out of Europe and optimism that politicians here at home will address the fiscal cliff before the end of the year. The Dow Jones Industrial Average (DJINDICES: ^DJI  ) is currently up 106 points, or 0.81%.

Data out of Germany suggests that economic confidence there is on the rise. The German ZEW index, a measure of investor confidence in the Continent's biggest economy, jumped sharply this month. While economists were predicting a reading of negative 12, the figure came in at a positive 6.9. The previous reading was a negative 15.7. According to a senior European economist cited by Reuters: "The [ZEW] rise confirms earlier worldwide survey results signaling that the global industrial cycle has turned and that world trade is picking up."

Meanwhile, confidence is growing on the domestic front that U.S. politicians will be able to reach a deal before the economy plunges over the fiscal cliff in January. Over the weekend, President Obama and House Speaker John Boehner met privately at the White House to discuss the matter. While no news from the meeting has been released, the fact that the two sides have ratcheted down their public attacks and are still meeting can only be interpreted as a sign of progress. Though, as they say, the pig still ain't in the pen.

With respect to individual company news, the international banking powerhouse HSBC (NYSE: HSBC  ) has confirmed that it's agreed to settle money laundering charges. The bank will pay a record $1.9 billion fine and is allegedly prepared to admit that it moved money for the likes of Iran and South American drug lords in violation of the Bank Secrecy Act and the Trading with the Enemy Act, among other U.S. laws.

According to the bank's CEO, Stuart Gulliver:

We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes.

Traders have bid up HSBC's shares on the heels of the news; they are currently trading higher by 0.78%.

Also making news today, the Treasury Department is set to sell its remaining stake in AIG (NYSE: AIG  ) , the American insurance giant that it effectively nationalized in September 2008. The government will sell roughly 234 million common shares at $32.50 each. All told, according to The Wall Street Journal, the government will have a net positive return on the AIG bailout of $22.7 billion.

In a letter to AIG employees earlier today, the company's CEO, Robert Benmosche, commented: "There is a saying that in American life, there are no second acts. Well, take a bow, because today marks our second act." Evidently, AIG's CEO is under the impression that the company, and not taxpayers, are responsible for its continued relevance. Needless to say, that's not exactly how many of us probably see it.

Shares of AIG are up by 4.4% in intraday trading.

Finally, shares in Delta Air Lines (NYSE: DAL  ) are trading sharply higher today after the company announced that it has agreed to buy a 49% stake in Virgin Atlantic Airways for $360 million. The move will give Delta a larger share of traffic in and out of pivotal European airports like Heathrow Airport outside of London. The previous stakeholder, Singapore Airlines, released a statement saying, "We have said for many years that the investment has underperformed, and that we would consider offers for the stake." Given the fact that Delta's stock is currently higher by 6%, investors seem to think that the second-largest U.S. carrier will have more success at integrating the two operations.

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  • Report this Comment On December 11, 2012, at 7:10 PM, dabyrdman wrote:

    I don't think the Benmosche quote means what you are saying it means. I think these employees saw that their jobs could be lost, and the company along with the government (aka the people) have turned this company back from the depths of hell and managed to bring a profit for the people that came to their aid. Although the return on investment isn't great, this is still a lot better than AIG failing and no one gets their money back. Also, there are plenty of lessons learned, and a good number of reforms that have followed this disaster. AIG wasn't the only cause to this debacle, but they are one of the few that has made a return for the government. And now the sale of nearly the last bit of the government stake is another step towards returning this company to half of its former glory.

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