Dow's 2-year high gets some downer news

The stock market was closed for the Fouth of July holiday Monday after closing Friday with a rally that topped its best week in two years.

However, European stocks struggled Monday to extend last week's gains after Standard & Poor's warned that a recent French proposal to get banks involved in helping Greece would trigger a default on the country's debt.

Sentiment last week was buoyed by an easing in the Greek debt crisis after the country's lawmakers backed austerity measures required from international creditors in return for more bailout cash.

Relief that a Greek default has been avoided helped stock markets around the world post one of the best weeks in months — the Dow Jones Industrial Average had its best week in two years.

However, S&P's warning on Monday that two proposals by an association of French banks "would likely amount to a default" weighed on the European opening despite earlier gains in Asia.

Buying interest in American market in the past week was broad-based -- only seven stocks within the S&P 500 posted a loss. The 10 sectors gained at least 2.9 percent. Tech led the way, rallying 6.9 percent, followed by a 6.4 percent gain in industrials.

Defensive sectors underperformed on a relative basis with Consumer staples up 2.9 percent and utilities gaining 3.4 percent.

The rally this week leaves only financials in the red for the year, down 2.0 percent.

A rebound in U.S. manufacturing surprised investors Friday, sending the Dow Jones industrial average up nearly 170 points. The Dow ended up 648 points, or 5.4 percent, for the week. It was the index's best week in two years.

The rally started Monday after Nike Inc. reported strong quarterly results. Revenue that beat analyst predictions indicated that shoppers are still splurging on pricier sneakers and sportswear, despite the recent run-up in gas prices.

Thursday, Greece cleared its final hurdle before it receives its next round of loans to avoid default on its debt. The same day, a report showed that manufacturing in the Chicago region had picked up unexpectedly.

Friday's Institute for Supply Management report showed that manufacturing across the country had expanded, reinforcing the growing perception that the slowdown was temporary.

Federal Reserve Chairman Ben Bernanke and a number of prominent economists have argued that the economy will pick up again once the effects of the Japan disaster waned and high gas prices receded.

It's quite a turnaround from May and early June. Many economists and analysts began lowering their estimates for growth in May after a string of negative reports on manufacturing, consumer spending and hiring by private companies.

A shortage of computer chips and auto parts from Japan, higher gas prices and severe weather in the South all contributed to what appeared to be a slowdown in the economic recovery. Stocks had lost most of their gains for the year by mid-June.

Todd Salamone, an investment strategist at Schaffer's Investment Research said the recent surge in stocks represents an "unwinding of the tremendous negativity that built up over the past few weeks."

The Dow closed up 168 points, or 1.4 percent, at 12,582.8, on Friday. The Standard and Poor's 500 index gained 18.9, or 1.4 percent, closing up at 1,339.7. The Nasdaq composite added 42.5, or 1.5 percent, closing at 2,816.

All 30 stocks in the index rose Friday. Companies that do well during times of economic expansion led the index. Alcoa Inc. and Caterpillar Inc. each gained more than 2 percent.

It was the fourth time this week that the Dow gained more than 100 points. The Dow's 648 point gain for the week is its largest since the bull market began in March 2009. It is up 8.7 percent for the year, about 2 percent below its April high. The S&P is up 6.5 percent for the year. It had been up as high as 8.4 percent.

A rebound in automobile sales also helped send stock indexes higher on Friday. General Motors and Ford Inc. both said that their sales rose 10 percent over this time last year. Car companies have been forced to slow the production of some models because of the shortage of parts following the earthquake and tsunami in Japan.

Honda and Toyota said recently that their North American production is beginning to return to normal. That has helped push the national manufacturing index higher. The ISM index rose to 55.3 in June from 53.5 the month before based on a scale in which a number above 50 indicates growth.

Among U.S. companies, the for-profit education company Apollo Group rose 6 percent despite a steep drop in student enrollment. The company's profits fell, but not as much as analysts had predicted.

Darden Restaurants, the parent company of Red Lobster and the Olive Garden, also rose 6 percent after reporting that sales rose in all of its divisions.

And Eastman Kodak lost 14 percent after a judge threw out some of its claims in a trade dispute with Apple Inc. and Research in Motion Ltd.