U.S. stocks stayed in the black Wednesday, despite growing worries over the fate of Europe's banking system. Several traders said the modest uptick in U.S. and European markets was simply a relief rally after a steep sell-off Monday. Still, yields on 10-year Spanish bonds keep rising. Yields on these bonds hit all-time euro-era highs of nearly 6.8%, indicating just how fearful investors are of the safety of Spain's sovereign debt. Italian bond yields also rose Tuesday, remaining above the 6% benchmark -- a warning sign that the country could need a bailout of its own.
Adding to the pressure on Spain's banking system, Fitch Ratings downgraded 18 Spanish banks. "Markets are in a holding pattern," said Douglas DePietro, managing director of trading at Evercore Partners. He said volume has been light Tuesday. "Investors are really waiting for more direction from world leaders over the next seven to eight days, said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.
Elections in Greece this Sunday are seen as a pivotal moment that could determine if the country remains a member of the euro currency union. The Dow Jones industrial average added 90 points, or 0.7%. The S&P 500 gained 11 points, or 0.9%. The Nasdaq rose 24 points, or 0.9%. Art Hogan, managing director at Lazard Capital Markets, said he's concerned that it will be difficult to maintain the early positive momentum for stocks, just as it was Monday.
U.S. stocks closed Monday trading with all three indexes down more than 1%. "You see a modest updraft in the European markets, and we seem to be enthusiastic about that," Hogan said. "I think we're in the environment where the risk is more to the downside, especially on days where there is no catalyst."
World markets: European stocks were mixed in late afternoon trading. Britain's FTSE 100 ticked up 0.2%, while the DAX in Germany dropped 0.4% and France's CAC 40 edged 0.8% lower. Asian markets closed lower Tuesday, after ending higher Monday on stronger economic readings out of China. The Shanghai Composite fell 0.7%, while the Hang Seng in Hong Kong slid 0.4% and Japan's Nikkei ended 1% in the red. Economy: At 2 p.m. ET, the Treasury Department will release its monthly budget report. Investors will look for a repeat of last month, when the Treasury revealed a $59 billion surplus, the first monthly budget surplus since September 2008.
Companies: Shares of Michael Kors shot up, after the fashion retailer reported fiscal fourth-quarter sales that more than doubled from last year's results. The report easily topped forecasts as well as the company's earlier guidance. Juniper Networks shares rose, after the company announced a $1 billion share repurchase plan late Monday.
Apple shares dropped Monday -- the day of its developer's conference. Its announcement of the new MacBook Air and other products wasn't enough to pull it from a recent slump. Shares rose slightly Tuesday.
Currencies and commodities: The dollar lost ground against the euro and the British pound, but rose slightly versus the Japanese yen. Oil for July delivery gained 65 cents to $83.33 a barrel. Gold futures for August delivery gained $13.60 to $1,610.40 an ounce. Bonds: The price on the benchmark 10-year U.S. Treasury fell, taking the yield up to 1.63% from 1.60% late Monday.