Stocks jumped, sending the Dow Jones Industrial Average to a record, and commodities rose as China vowed to maintain its growth target, U.S. service-industry growth improved and investors bet central banks will continue stimulus measures. Treasuries fell and the dollar weakened.
The 116-year-old Dow climbed 125.95 points, or 0.9 percent, to 14,253.77 and the Standard & Poor’s 500 Index added 1 percent as of 4 p.m. in New York. The Stoxx Europe 600 Index jumped to a four-year high while the Shanghai Composite Index (SHCOMP) rebounded 2.3 percent from its biggest loss since August 2011. The S&P GSCI (SPGSCI) gauge of 24 commodities halted a five-day slump as oil rebounded after dipping below $90 a barrel yesterday for the first time this year. Italian and Portuguese bonds rallied.
About $10 trillion has been restored to U.S. equities in the past four years as retailers, banks and manufacturers led the recovery from the worst bear market since the 1930s. It took the Dow less than 65 months to rise above its previous high set on Oct. 9, 2007, more than a year faster than the recovery from the Internet bubble.
“It’s nice to know that we’ve recovered from the losses of the financial crisis, but it doesn’t impart any meaning as to where do we go far from here,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $130 billion in assets, said by telephone. “The more interesting questions to ask are what’s happening with fundamentals? We think they’re improving. What about valuations? We think they’re reasonable.”
The Dow Jones Transportation Average, a gauge of 20 truckers, airlines and shipping companies, also closed at a record today in a bullish sign for followers of “Dow Theory” which says both transportation and industrial stocks need to move higher in tandem for market rallies to last. The Russell 3000 Index and the Russell 1000 Index also reached records today.
The S&P 500 climbed within 2 percent of its record closing level of 1,565.15 set on Oct. 9, 2007, the same day the Dow set its previous high of 14,164.53. Among U.S. stocks moving today, BMC Software Inc. jumped 3.7 percent after people with knowledge of the matter said the company has attracted renewed buyout interest. American Apparel Inc. climbed 19 percent after forecasting sales for this year that exceeded estimates. J.C. Penney Co. slipped 11 percent after its second-biggest shareholder sold part of its stake.
Equities extended gains today after the Institute for Supply Management’s non-manufacturing index increased to 56 last month from 55.2 in January. Economists projected the gauge would be little changed at 55, according to the Bloomberg survey median. Readings above 50 signal expansion.
Federal Reserve Vice Chairman Janet Yellen said yesterday the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program. The European Central Bank will probably keep its benchmark rate unchanged at its meeting this week, according to a Bloomberg survey.
Cisco Systems Inc., United Technologies Corp. and Boeing Co. rose more than 2 percent to lead the Dow’s gain today. The 30-stock average erased losses from the financial crisis after a four-year rally fueled by the fastest profit growth since the 1990s and monetary stimulus from the Fed.
“Monetary easing has been a main driver of equity markets,” Fabrice Seiman, co-chief executive officer of Lutetia Capital in Paris, who helps oversee about $200 million, said in a phone interview today. “When those accommodative policies will be withdrawn, they will be withdrawn only gradually. Equities at the moment offer you capital appreciation but also a dividend yield.”
While the Dow has more than doubled in the four years since its bear-market low, its valuation remains about 19 percent less than the price-earnings ratio at the previous peak and about 14 percent below its 20-year average. Bulls say that’s a signal stocks have room to keep rallying, while to bears it shows a lack of confidence in earnings growth and concern over the Fed’s ability to continue spurring the economy. At 2.5 percent, its dividend yield is higher than the yield on 10-year Treasuries, which rose 2 basis points to 1.90 percent today.
American Express Co., Caterpillar Inc. and Home Depot Inc. have led the Dow’s rally since its 2009 low, climbing more than 275 percent as the economy recovered from the worst recession in seven decades. Hewlett-Packard., the largest personal computer maker, is the only stock still in the 30-company gauge to fall since March 9, 2009.
The Stoxx 600 climbed to its highest level since June 2008. A gauge of banks contributed the most to the equity benchmark’s rally as Standard Chartered Plc gained 3.2 percent after reporting pretax profit for 2012 that exceeded analysts’ estimates. Profit set a record for a 10th consecutive year. Glencore International Plc rose 5.7 percent after saying it will complete the takeover of Xstrata Plc by April 16. Xstrata added 6.8 percent after also posting net income that beat estimates.
Serco Group Plc surged 8.9 percent after the operator of London’s Docklands Light Railway increased its dividend by 20 percent.
European equities also rallied after euro-area services output shrank less than initially estimated in February and retail sales rose the most in three years in January.
The yield on Portugal’s 10-year bond fell 23 basis points to 6.16 percent. Spain’s 10-year bond yield fell for a fifth day, dropping five basis points to 5.04 percent. German bund yields climbed three basis points to 1.45 percent amid reduced demand for Europe’s benchmark government debt.
European finance chiefs may next month commit to giving Ireland and Portugal more time to repay bailout loans, Economic and Monetary Affairs Commissioner Olli Rehn said yesterday.
The cost of insuring against default on corporate debt also declined, with the Markit iTraxx Europe index of credit-default swaps linked to 125 investment-grade companies falling four basis points to 112.6, the lowest in more than a week.
The dollar weakened against 13 of 16 major peers, slipping 0.2 percent to $1.3048 per euro. Australia’s currency rallied 0.5 percent to $1.0251 after the Reserve Bank kept interest rates on hold.
The S&P GSCI gauge rose the most since Feb. 25 after falling 2.8 percent the past five days. West Texas Intermediate oil rose 0.8 percent to $90.82 a barrel after yesterday dipping below $90 for the first time this year. Brent crude traded in London jumped 1.3 percent to $111.57 as a pipeline system shut after a platform leak, boosting the European benchmark. Copper gained for a second day. China is the biggest buyer of energy and industrial metals.
China will keep its economic growth target at 7.5 percent for this year and plans a 10 percent jump in fiscal spending, the government said during the start of the National People’s Congress today.
The MSCI Emerging Markets Index (MXEF) rose 0.8 percent, snapping a two-day retreat. The Shanghai Composite Index rallied after falling 3.7 percent yesterday, its biggest decline since August 2011. India’s Sensex climbed 1.4 percent, the most in three months, while Russia’s Micex index added 1.4 percent and Brazil’s Bovespa gauge decreased 1 percent.
Venezuela’s IBC Index closed little changed. The death of President Hugo Chavez, who was last seen in public following cancer surgery last year in Cuba, was announced by Vice President Nicolas Maduro on state television after financial markets closed. Chavez, the self-declared socialist who transformed the nation’s politics by channeling record oil revenue to the poor and nationalizing corporations, was 58.
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