MARCH 21, 2011, 10:26 P.M. ET.

Dow Reclaims 12000 With 178-Point Jump

By JONATHAN CHENG

In the newly binary world of financial markets, Monday was "risk on."

Investors, emboldened by signs the worst may be over in Japan and the Middle East, snapped up riskier assets such as stocks, commodities and the euro and shunned safe-haven investments like Treasurys.

Stocks surged Monday on investor relief that the nuclear crisis in Japan didn't worsen any further over the weekend, pushing the Dow back over the 12000 level. Paul Vigna has details.

The Dow Jones Industrial Average jumped 178.01 points, or 1.5%, to 12036.53, bringing the blue-chip index's three-day gain to 3.6%. That winning streak is the Dow's strongest three-day run since September. The euro rose through $1.42 to finish at its highest point in 14 months. Gold rose 0.7%.

The troubles in Japan and unrest in the Middle East and Northern Africa have seen financial markets revert to the "risk on/risk off" mode seen through the financial crisis: Investors flee to Treasurys and safe havens in times of stress and rush into stocks and commodities during times of optimism.

The past few days have seen investors moving further into riskier assets on hopes that Japan's nuclear crisis may not escalate and of a quick resolution to the war in Libya. The gains allowed investors to claw back some of the 6.3% slide in the Dow since Feb. 18, just before the outbreak of violence in Libya. Investors already were beginning to read that selloff as overdone, especially Wednesday's rout that saw the Dow plunge more than 300 points during the day.

"There are still lots of opportunities to generate hysteria in the coming days, but I think a careful analysis shows that what's happening in Japan will be transitory," said Jim McDonald, chief investment strategist at Northern Trust. Still, he said, "we're going to be hostage to geopolitical markets in the short term."

Adding to the optimism was AT&T's $39 billion agreement to buy Deutsche Telekom's T-Mobile USA unit, a deal that would create the largest mobile-phone service provider.

To be sure, investors aren't ready to call the all-clear on the myriad challenges still facing the global economy, from soaring oil prices, political instability across the energy-exporting Middle East, and nuclear risks after this month's Japanese earthquake.

US stocks are up sharply amid AT&T's big offer for T-Mobile, and moderate progress at Fukushima Daiichi. But crude prices are rising, too, amid the fighting in Libya. Kristina Peterson, Jerry DiColo and Paul Vigna report.

"It's still a news-dependent, data-dependent market," said John Brady, senior vice president at MF Global.

For oil investors, fears are increasing that a protracted engagement in Libya would keep the country's oil off the market for months or years. Moreover, worries about potential unrest in Saudi Arabia, the world's largest exporter, remain.

"The question is whether Saudi Arabia can keep its relative domestic tranquility," Mr. McDonald said.

But investors returned from a relatively encouraging weekend of news from Japan and the Middle East, as well as bullish remarks by investor Warren Buffett that called the U.S. and Japanese economies strong, saying the earthquake created "a buying opportunity" in the world's third-largest economy.

The Standard & Poor's 500-stock index gained 19.18 points, or 1.5%, to finish at 1298.38, while the Nasdaq Composite surged 48.42 points, or 1.8%, to 2692.09, returning to positive territory for 2011. The markets were led by energy stocks after crude oil rose.

The dollar slumped against most of its rivals. The U.S. Dollar Index, which weighs the greenback against a basket of six currencies, fell to a 15-month low. The euro rose after European Central Bank President Jean-Claude Trichet indicated the bank still plans to raise interest rates next month. The Japanese yen, which last week surged to a record, continued to weaken amid the prospect of further intervention by the Group of Seven leading nations.

Treasurys fell broadly, pushing the yield on the 10-year note higher, to 3.319%. The Japanese stock market was closed Monday for a holiday, but U.S.-listed exchange-traded funds dealing in Japanese stocks surged by about 3% in heavy trading volumes. Across the broader markets, however, trading volumes were relatively tepid, with 4.65 billion shares changing hands in New York Stock Exchange composite volume.

Among energy companies, drilling contractor Rowan added $2.22, or 5.5%, to $42.65, while driller Noble rose 2.02, or 4.7%, to 45.35, and petroleum refiner Tesoro gained 1.01, or 4.1%, to 25.63.

Financials strengthened after the Treasury Department said it plans to start selling off the $142 billion portfolio of agency-guaranteed, mortgage-backed securities it purchased during the financial crisis. Traders said the government's confidence in its ability to sell the securities in an improved market reflects the sector's improved health.

Hartford Financial Services Group gained 1, or 3.9%, to 26.49, while American International Group jumped 2.08, or 6%, to 37.03.

Boeing gained 2.10, or 3%, to 71.20, after its newest 747 passenger jet took to the skies for the first time Sunday, marking the third maiden flight of a new Boeing commercial airplane in the past 15 months.

Write to Jonathan Cheng at jonathan.cheng@wsj.com

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