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Stocks closed sharply higher after a wild final hour of trading Thursday following a report that central banks are preparing coordinated action to provide liquidity after the Greek election.
The day’s rally was initially fueled by hopes that the Federal Reserve might come up with another round of stimulus on the heels of some weak economic reports.
A senior U.S. official cautioned that the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis, according to Reuters. But if severe market strains emerge after the elections, central bankers will be ready to ensure enough cash is flowing through the financial system.
“The central banks are worried about bank runs because if Syriza wins on Sunday, you could see [more] bank runs in Greece and there’s fear that maybe we can get some in the peripheral countries,” said Peter Boockvar, equity strategist at Miller Tabak. “But this reminds me of the magic candle—you blow it out, but it flares up again. It goes out only temporarily.”
The Dow Jones Industrial Average rallied 155.53 points, or 1.24 percent, to close at 12,651.91, led by Home Depot and Travelers . The blue-chip index initially surged 200 points following the central bank report.
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