NEW YORK (Reuters) - U.S. stocks rose on Wednesday, with the S&P 500 set to erase all its losses from Tuesday as signs of easing political turmoil in Italy emerged.
Italy’s 5-Star Movement party made a renewed attempt to form a coalition government and called for eurosceptic economist Paolo Savona to withdraw his candidacy as economy minister.
The Italian government’s successful auction of five- and 10-year bonds also assuaged concerns about the country’s ability to finance itself after a sell-off in Italian bonds on Tuesday resulted in the biggest one-day surge for two-year yields in 26 years.
Fears about instability in Italy had sent investors scurrying to safety assets on Tuesday. U.S. stocks took a beating, with the S&P 500 posting its first 1 percent drop in May, while the U.S. Treasury market had its best day since at least July 2011.
“The market is reversing what appears to be a knee-jerk reaction from yesterday,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. “As people take a step back, it appears that the sell-off was overdone.”
The Dow Jones Industrial Average .DJI rose 302.45 points, or 1.24 percent, to 24,663.9, the S&P 500 .SPX gained 34.81 points, or 1.29 percent, to 2,724.67 and the Nasdaq Composite .IXIC added 69.01 points, or 0.93 percent, to 7,465.61.
The Russell 2000 index of small-cap stocks hit an all-time high during Wednesday’s session, buoyed by data confirming the strength of the U.S. economy. Small-cap U.S. companies generally have less international exposure than their large-cap counterparts.
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