U.S. stocks gain on European optimism; Dow up 0.75% By Forexpros

[Ramon Ramirez]

U.S. stocks rose on Friday, as investors bought stocks on hopes that Europe will work through its debt problems by financially assisting Spain.

The Dow Jones Industrial Average closed up 0.75% on Friday, the S&P 500 index was up 0.81% while the Nasdaq Composite index finished up 0.97%.

Spain appeared set to ask for assistance to recapitalize its banking sector, and while such news sparked demand for the greenback in foreign-exchange markets, stock markets enjoyed a risk-on session on sentiment that assistance for Spain will bring stability for the eurozone.

Spain has run under financial strain as it seeks to bolster its banking system, while talk regional Spanish governments will need help from Madrid to refinance their debts have also rattled markets lately.

Talk of a bailout fueled relief buying, especially on sentiment that the situation in Europe, the U.S. and in Asia hasn't been as bleak as once predicted.

Meanwhile, Federal Reserve Chairman Ben Bernanke on Thursday gave a rather muted response to lawmakers as to whether the U.S. economy requires monetary stimulus.

"The Federal Reserve remains prepared to take action as needed to protect the U.S. economy in the event that financial stresses escalate," Bernanke told the Joint Economic Committee, which gave investors little guidance but eventually brought in buyers on the notion that silence on the need for stimulus suggested the economy is showing some sign of recovery.

Meanwhile, low oil prices sparked demand for stocks as well.

Oil was trading around USD84.36 a barrel on Friday.

Lackluster data out of Europe's largest economy sent oil prices edging lower and also sent investors buying nicely priced U.S. equities.

In Germany, exports fell 1.7% in April, outpacing analyst’s expectations for a 0.7% decline, which reflects weak demand for products made in Europe's economic engine.

In Italy, industrial output in April contracted 1.9% from a revised 0.6% gain in March, far outpacing expectations for a contraction of 0.5%.

Italian industrial production dropped by an annual rate of 9.2% further fueling fears the European economy is battling major headwinds thanks to the debt crisis.

In the U.S., the Commerce Department reported the country's trade deficit narrowed 4.9% in April to USD50.1 billion compared with market forecasts for USD49.5 billion.

Leading Dow Jones Industrial Average gainers included Wal-Mart Stores, up 3.57%, JPMorgan Chase, up 2.59%, and Home Depot, up 2.11%.

Leading index losers included McDonald's, down 0.74%, Alcoa, down 0.35%, and Procter & Gamble, down 0.06%.

European indices, meanwhile, finished largely down.

After the close of European trade, the EURO STOXX 50 rose 0.04%, France's CAC 40 fell 0.63%, while Germany's DAX 30 finished down 0.22%. Meanwhile, in the U.K. the FTSE 100 closed down 0.23%.