Dow Jones industrial average surges to record
NEW YORK (AP) — The Dow has never been higher.
The Dow Jones industrial average surged 154 points early Tuesday, reaching 14,283 and breaking through its previous record high set in October 2007.
The gains represent a remarkable comeback for the stock market. The Dow has more than doubled since falling to a low of 6,547 in March 2009 following the financial crisis and the Great Recession. Stocks have rebounded sharply since then with the help of a large dose of stimulus from the Federal Reserve, even as the U.S. economy has failed to get out of first gear.
"Whether they want to admit it or not, everyone is very impressed with the resilience of the market," said Alec Young, a global equity strategist at S&P Capital IQ.
The last time the Dow was this high, Apple had just sold its first iPhone and George W. Bush had another year as president. The U.S. housing market had yet to implode, and the financial crisis that brought down Lehman Brothers was still a year away.
Despite the stunning gains in the stock market since then, the U.S. economy has not fared nearly as well. Unemployment was just 4.7 percent when the Dow last reached a record, versus 7.9 percent today.
Stocks have rallied powerfully this year, impressing even market's most ardent skeptics, on optimism that the housing market is recovering and companies are slowly starting to hire again. Strong corporate earnings have also helped increase demand. The Dow is already up 9 percent so far this year, which many would consider a respectable gain for a full year.
The market has benefited from economic stimulus from the Federal Reserve and other global central banks. The U.S. central bank is buying $85 billion each month in Treasury bonds and mortgage-backed securities to keep long-term interest rates very low.
Tuesday's gains were driven by industrial and technology stocks. That's a signal that investors are optimistic about the economy, since those companies stand to gain the most when the economy recovers. More stable, conservative stocks like utilities and consumer staples also rose, but trailed the market. IBM, United Technologies and the manufacturer 3M led the Dow higher.
On Tuesday investors received another piece of positive news on the U.S. economy, a report that U.S. service companies grew in February at the fastest pace in a year, thanks to higher sales and more new orders. The gain suggests higher taxes have yet to slow consumer spending on services.
Home builder PulteGroup rose 42 cents to $20.12 following news that home prices rose at the fastest pace in almost six years in January, a sign that the housing market is gaining momentum as it nears the spring selling season. Home prices rose 9.7 percent in January from a year ago and had the biggest gain since April 2006, according to data released by CoreLogic
The Dow's gain early Tuesday was equivalent to 1 percent. If it stays this high it will finish above its record high close of 14,164 set on Oct. 9, 2007.
In other trading, the Standard & Poor's 500 index rose 16 points, also 1.1 percent, to 1,541. The S&P is also within striking distance of its own record close of 1,565. The Nasdaq composite gained 41 points, or 1.3 percent, to 3,213.62.
The yield on the 10-year Treasury note, which moves inversely to its price, rose one basis point to 1.89 percent.
Among other stocks making big moves:
— Ascena Retail Group gained $2.37 to $18.80 after the clothing store reported stronger-than-expected sales in its most recent quarter.
— J.C. Penney fell $1.29 to $15.45 following media reports that one of its largest shareholders is selling a major stake in the retailer. CNBC and The Wall Street Journal reported that Deutsche Bank is shopping around the sale of 10 million shares of the company's stock held by Vornado Realty Trust, a real estate investment trust.