Stocks Skyrocket on European Debt Deal

Debra Borchardt explains the deal and Wall Street's reaction.
7:03 | 10/27/11

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Transcript for Stocks Skyrocket on European Debt Deal
Dow futures were up sharply this morning on news of a deal to ending Europe's financial crisis draining -- discuss the details. The deal and -- business headlines as Deborah -- -- from the street K Deborah good to see -- -- CEO so this is a big deal this morning everybody watching let's start out with the basics what are the major points agreed to in this new plants right welcome. Market is reacting because they didn't expect that these guys can get together and come up with a plan they came -- but the plan and there's really three key elements to the plan. And the first one has to do with the haircuts for this these this debt so all these banks the -- this -- are being told. He got a ticket discount on this debt and so that's that's the big number here it -- told 50% discount. OK and what irony to two other major points -- we're gonna mention Debra -- -- -- two other ones are happy to have to do with the bailout fund right now -- at 400 billion they are amp add it up to one true brilliance that's a huge amount of money that they're pulling together that they're going to use to. Help these countries out and put money back and other -- their systems and our government. And then the third have to do with the recapitalization. Of the banks -- told the banks you know what. You gotta get more money into your bank and so they have got to raise even more capital than what -- -- raised. Now -- key feature I understand and this plan is and that it's voluntary it's exactly what that means. And whether that might be a problem in the future. Right so as I mentioned at the top about the haircut a lot of people don't quite understand it could have -- -- -- Wall Street term -- but have to do with discounting the value of these bonds showed you on a house in new bottom for 200000 ballots only worth a 100000 the -- gonna tell you you know what it's only worth a 100000 you gotta take that -- down. And so. That's what they told the bank she got to take the value down on these assets but. -- only have -- good if you want there -- that that's the real problem because a lot of the banks bought what's called credit default swaps -- insurance. So that if this happens if they had that they can discount that could collect insurance that its net down. Now they're being told. It's voluntary it's a voluntary events so that doesn't trigger. Your insurance payments now lot of anger out there about okay outweigh the money to find this massive plant supposed to come from. Right you wonder you know we got this plant where we're gonna do other stuff let all this money but where -- we gonna get all this money. Well also today Sarkozy. Who is -- you know the head of France. Is supposed to do call that -- is -- -- them if they can help out some. It felt good to sell many people that want a part of this Chinese money in the Chinese have only set. They'll take a look at it they have payment committed anything you feel like. Circus he's probably got to put a speakerphone on and -- at a conference call that so many people are part of this Chinese money it. If it even come. -- all right let's take a look at how the markets are reacting right now to this news -- just taking a look at the big board right now. Skyrocketing really shares right now just the Dow up more than 230. Points -- now so what are we seeing right -- well. Mentioned we -- didn't think we're gonna get a plan we've been dealing with this mess for two years two years our markets have been. Jumping around and volatile because we had no idea what was gonna happen over there. It's not a great plan but it's a plan so that's why the market is reacting really very very well. Answers to take and certainty out of the market the market hates uncertainty cell I would expect we're gonna have a monster -- Our concerns that once people really get into some of the right there are a lot of polls here. They think that will -- -- now they have something to work what they have a framework in place. And they think that really they're just gonna make this thing happening they really pretty much capped it -- With the discounts they told the bank with an a you don't take 50% we're gonna go on nuclear on -- -- and just completely. And make these banks didn't make grief consolidating and nothing new zeros and pay the 50%. Or zero I mean the stakes are really high for the global economy. What we -- got sixty companies reporting earnings today switching gears here a little -- what are some of the big ones to watch as far as earnings. Well here we -- that oil -- oil is up on this is that this year -- plan because again it starts didn't you know bring things about that things are gonna start to. To happen and and answer to recover so we had reports -- -- ExxonMobil and shell both. -- monster profits happening with these these oil companies -- now I mean. They are making a ton of money and it even when oil. Recently went down. They're just still making huge huge profits so great news out of ExxonMobil and shell today apparently got some encouraging GDP -- -- about an hour ago it. It expanded at an annual rate of two and a half percent. During the third quarter what is your take on this bright GDP boy that came -- -- 2.5 percent we -- that that that was the number that the market was hoping for. It takes that talk of a double dip recession off the table you cannot have a recession with 2.5 percent GDP growth. People are buying cars Ford reported that numbers yesterday. People in and then they're they're -- their their production for the fourth quarter. People are buying cars they're buying clothes they may not have done that in in the August -- they may not have spent their money then. They're spending their money down remember. 90% of Americans do have jobs so we focus summit 10% that are unemployed that 90% of the country is working they're bringing home a paycheck. And then they're they're out there shopping OK and speaking of employment were also out this morning a weekly jobless claims any surprises there. -- you know it was pretty benign although we're we're trending in the right direction we haven't cracked that 400000 jobless claims number. But what what I thought was also encouraging in the GDP was that a lot of this growth was business investment spending -- so much government spending so we're starting to. -- sells off of that government spending. And all that easing in all the gifts from the government -- certain to do it organically with business spending when you get businesses starting to spend. -- -- get them starting to add some jobs and that's going to be the right direction well but the right direction that's our hope all right anything else you'll be watching today lots of news -- -- and -- on your right there's so many earnings going on we're going to be really probably listening to. Whether Sarkozy -- any luck with the Chinese and then of course that would tomorrow we get the big jobs number. I don't they were gonna get anything unusual event but we'll just keep watching some of these earnings in and try to get a good direction right now -- mixed. But will keep our eye on that and hopefully -- the etiquette phone calls and saying yeah let's take a look. That allowed one last look at the Dow rang out at six minutes into trading and -- -- -- rain up 2% Debra. Rye -- yesterday it was a good data by have to cover Bart Starr from the straight thanks -- -- ever -- to see you again.

This transcript has been automatically generated and may not be 100% accurate.

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