Stocks close slightly higher
NEW YORK — The stock market finally got a deal in Greece, but it didn’t produce much of a rally.
U.S. stocks rose Thursday morning after Greece announced an agreement to cut costs and keep from defaulting on its debt next month, an event that could have shocked the world financial system.
But stocks dropped later in the morning and never returned to their highs for the day.
Analysts cautioned that the market had expected the deal in Greece and warned that Europe still faced problems.
“We still have a lot of wood to chop,” said Jeremy Zirin, chief equity strategist at UBS Wealth Management.
The markets have had a strong start this year, mostly because of optimism about the economy.
The Dow has gained 5.5 percent, the S&P 7.5 percent.
But Zirin said the markets had assumed Greece would reach a deal to keep from defaulting, and that is the reason stocks didn’t skyrocket on the news.
The deal calls for Greece to make steep cuts in government jobs and spending.
But the cuts will be hard to implement in a country that has grown used to profligate government spending. Workers are already protesting that job cuts and pay cuts have been too severe.
The country has missed other targets for reducing its debts. It also still has to persuade private investors to agree to losses on their holdings, which will make those investors less likely to buy Greek bonds in the future.
And other European countries, notably Portugal and Italy, still have long-term debt that economists warn could be unsustainable.
Nigel Travis, CEO of Dunkin’ Brands, said the agreement in Greece will be a psychological boost for consumers. And when they feel good about the economy, they’re more likely to spend, regardless of whether their wealth is directly affected, he said.
But Travis, whose company runs Dunkin’ Donuts and Baskin-Robbins, said Greece wasn’t the most pressing problem facing his franchisees. They’re more concerned about the U.S. presidential election and getting clarity on whether terms for government-backed small-business loans will change and whether a cut in the Social Security payroll tax will be extended.
“I think it’s good news,” Travis said of the Greece deal. “Whether it actually solves the euro problem, you have to question.”
The euro rose slightly against the dollar to $1.33, its highest level in two months.
In other news:
APPLE: It closed in on $500 per share and set an all-time high after reports that it will unveil the iPad 3 at an event in March. The stock has been on a tear for six weeks, rising 22 percent since the start of the year and securing Apple’s place, at least for now, as the world’s most valuable company by market cap, ahead of Exxon Mobil.
GROUPON: The daily deal website fell 14 percent after it announced a surprising quarterly loss in its first earnings report as a public company.
ORACLE: It is paying $1.9 billion for Taleo Corp., a company that helps businesses manage their employees.
DIAMOND FOODS: The maker of Emerald Nuts and Pop Secret popcorn plunged 37 percent. It announced late Wednesday that it was ousting its top two executives amid allegations of improper accounting.
TRIPADVISOR: The website where travelers can post advice and reviews lost 15 percent after it missed analysts’ earnings expectations. Like Groupon, TripAdvisor was also making its first earnings report as a public company. The website spun off from Expedia in December.
PEPSICO: It fell 4 percent after announcing it will cut 3 percent of its workforce, a defense against higher costs for materials.
LENOVO: The world’s No. 2 personal computer maker said quarterly profit grew by more than half but warned hard drive costs would remain high amid a global shortage.
DAIMLER: Strong sales of Mercedes luxury cars in China and the United States helped the German automaker post a stronger-than-expected 57 percent increase in fourth quarter profit.