Market Recap: Berlusconi’s Resignation Leads to Late Rally

Markets closed up on Wall Street today: Dow +0.84%, S&P +1.17%, Nasdaq +1.20%, Oil +1.53%, Gold -0.35%.

On the commodities front, Oil (NYSE:USO) climbed to $96.98 a barrel. Precious metals were mixed, with Gold (NYSE:GLD) falling to $1,784.90 an ounce while Silver (NYSE:SLV) climbed 0.38% to settle at $34.96.

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Today’s markets were up because:

1) Berlusconi. After a rocky morning, markets turned upward today on reports that Italian Prime Minister Silvio Berlusconi planned to resign, a fact Berlusconi himself confirmed in the last hour of trading. The premier said he will step down after parliament approves austerity measures pledged to European Union allies in order to secure European Central Bank purchases of Italian debt. Berlusconi’s announcement comes after his center-right coalition failed to secure an absolute majority in a crucial budget vote in the lower house, with only 308 votes in the 630-seat Chamber of Deputies, fueling demand for his resignation.

2) Earnings. Fossil (NASDAQ:FOSL) posted third-quarter earnings results that topped Wall Street’s expectations, though simultaneously lowering its guidance for the current quarter due to the strengthening dollar. Shares of Rackspace (NYSE:RAX) advanced after the company posted better-than-expected sales late Monday, while Priceline (NASDAQ:PCLN) shares also gained on an earnings beat.

3) Banks. Citigroup (NYSE:C), JPMorgan (NYSE:JPM), BNP Paribas, Royal Bank of Scotland (NYSE:RBS), and HSBC Holdings (NYSE:HBC) could be facing capital surcharges of 2.5 percentage points on top of Basel III capital requirements, news that had the banks trading lower before markets rallied on news of Berlusconi’s resignation. Bank of America (NYSE:BAC), Barclays (NYSE:BCS), and Deutsche Bank (NYSE:DB) may face surcharges of 2 percentage points, according to a provisional list prepared by global regulators, which has Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Bank of New York Mellon (NYSE:BK), Credit Agricole, Credit Suisse (NYSE:CS), and UBS AG (NYSE:UBS) facing surcharges of 1.5 percentage points. Wells Fargo (NYSE:WFC), Societe Generale, and Dexia SA, along with the remaining 15 banks on the list, are looking at surcharges of 1 percentage point.

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