The close: Dow, TSX surge back from abyss

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North American stocks staged a surprising comeback in late afternoon trading on Wednesday, lifting major indexes from steep declines.

The Dow Jones industrial average closed at 12,496.15, down 6.66 point or less than 0.1 per cent – after being down as much as 190 points earlier in the day. The broader S&P 500 closed at 1318.80, up 2.23 points or 0.2 per cent. In Canada, the S&P/TSX composite index closed at 11,564.80, up 113.02 points or 1 per cent, marking an amazing 300-point rebound from its low point.

You can thank Europe for the sudden turnaround, just as you could blame it for the initial selloff on Wednesday morning. At the start of a leaders' summit, markets were prepared for the worse – that the euro zone would essential cut Greece loose as it struggles to fill a political vacuum and ensure that it sticks to austerity measures to prevent sliding into default.

The tone switched quickly, though, with leaders maintaining that they want Greece to remain in the euro zone – at the same time that they work toward implementing measures to contain any messy fallout from a Greek withdrawal.

At the same time, the news closer to home was upbeat. U.S. new home sales rose 3.3 per cent in April, beating economists' expectations and conforming with recent data that suggest the housing sector is showing signs of modest improvement.

Facebook Inc., which is embroiled in allegations that the company and its underwriters botched the initial public offering, rose 3.2 per cent, marking its first gain since Friday. However, the share price remains nearly 16 per cent below its IPO price of $38.

Dell Inc. fell 17.2 per cent after the computer maker reported that its quarterly earnings fell 33 per cent over last year, amid shrinking revenues and gross margins.

Meanwhile, the quarterly reporting season from Canada's banks got off to a good start. Bank of Montreal reported that its fiscal second quarter earnings rose 27 per cent over last year, beating expectations. The share price rose 1.5 per cent, lifting other banks as well. Canadian Imperial Bank of Commerce rose 0.5 per cent and Royal Bank of Canada rose 1.4 per cent.