NEW YORK – Investors bought stocks again on the latest reassuring news about the economy. This time, it was about European banks.
European regulators, who issued the results of what are called "stress tests" on the banks, said only a handful would struggle if the continent's economy weakens. That helped send the Dow Jones industrial average rose more than 100 points.
The latest second-quarter earnings reports also convinced investors that the economic recovery is proceeding. And so did announcements that General Electric Co. is raising its dividend and reports that French drug maker Sanofi-Aventis is interested in buying Genzyme Corp.
Investors were initially cautious about the stress tests, which measure how well banks will fare if government debt problems and the region's economy worsened. Europe's debt issues have sent stocks falling worldwide since April amid concerns they could slow the global economic recovery.
There were some concerns in the market that the tests might not have been rigorous enough. And because the results were issued after the close of trading in Europe, it won't be known until Monday how investors on the continent react. And, if they react badly, if that will prompt U.S. investors to sell.
The tests showed that just seven of 91 European banks tested would fail. The European Union said the results should put to rest questions about the health of the continent's financial sector.
Financial stocks, which had struggled early in the day, started to climb after the results were released at midday.
Brian Peardon, a wealth adviser at Harrison Financial Group, said there could be an initial, "gut" reaction to the results based on the headlines alone, but the full impact on the market won't come until next week because there is so much information to sort through.
"It will take the weekend to digest whether they're good or bad," Peardon said.
And some analysts were skeptical because there was little known about the criteria used to test the banks.
"There's obviously a lot of smoke and mirrors in these types of tests," said Albert Meyer, portfolio manager of the Mirzam Capital Appreciation Fund. "They no doubt provide us with numbers that aren't too alarming, even if they are correct."
According to preliminary calculations, the Dow closed up 102.32, or 1 percent, at 10,424.62. The Standard & Poor's 500 index rose 8.99, or 0.8 percent, to 1,102.66, while the Nasdaq composite index rose 23.58, or 1.1 percent, to 2,269.47.
Rising stocks outpaced those that fell by a 4 to 1 margin on the New York Stock Exchange, where volume came to 1.15 billion shares.
European markets had already closed by the time the test results were released, so investors there couldn't make moves following the announcement. German shares rose after a closely watched business climate index rose unexpectedly for the fifth straight month. Germany's DAX index rose 0.4 percent, Britain's FTSE 100 fell less than 0.1 percent, and France's CAC-40 rose 0.2 percent.