The Dow Jones Industrial Average climbed to a record yesterday, erasing losses from the financial crisis and breaking through levels last seen in 2007 as China vowed to maintain its growth target and investors bet central banks will continue stimulus measures.
The Dow rose 126 points, or 0.89 per cent, surpassing its previous intraday peak of 14,198.1 from October 11th, 2007.
Investors poured money into blue-chip stocks in expectation of more gains amid signs of a strengthening US economy. The Dow has gained nearly 9 per cent so far this year, ahead of the SP 500 and Nasdaq Composite Index.
Gains came across the board, with 10 of the Dow’s 30 component stocks reaching new 52-week highs on a day when 456 securities hit new yearly highs on the New York Stock Exchange.
Analysts said yesterday’s advance was linked less to one specific catalyst and more to the same factors that have been driving the rally this year, namely attractive valuations and liquidity resulting from the US Federal Reserve’s easy monetary policies.
“Just because we’re testing old highs doesn’t necessarily mean the markets are going to capitulate. The underlying fundamentals still remain in place,” said Joseph Tanious, global market strategist at JP Morgan Funds in New York.
Markets have shrugged off the stalemate between the congressional Republicans and the White House over automatic US government spending cuts. Other headwinds have also been navigated without much pain.
“It’s been a bumpy ride, obviously, the past few years, but it appears corporate America has proved its resilience once again,” Mr Tanious added.
A big part of the rally that has continued in 2013 without a significant correction is the result of the US Federal Reserve’s easy monetary policy and the near zero short-term interest rates since December 2008. – (Bloomberg /Reuters)
