Dow Jones Industrial Average Index Of Stocks Sets Record High On Word Of China's Big Spending Plans, Fed's Loose Monetary Policy

 @MikeObelm.obel@ibtimes.com
on March 05 2013 10:50 AM
NYSE trading floor 2012 2
NYSE trading floor. Reuters

The benchmark Dow Jones Industrial Average rose to an all-time high on Tuesday as China's plans for big infrastructure spending buoyed investor sentiment and the Federal Reserve repeated its intention to continue its cheap-money policy into 2015.

On Tuesday, the blue chip index of 30 large industrial companies, which surpassed the previous record high of 14,164, set on Oct. 9, 2007, had climbed to an all-time high of 14,273.18 at 11:14 a.m. EST. The broader S&P 500 surged to 1,540.82, nearing its record of 1,565.15, set on Oct. 9, 2007.

"We have a pretty strong market, the economy seems to be taking advantage of a low interest rate environment. What happens when this QE3 kind of evaporates or goes away, that's the major question in the back of my mind," Anthony Conroy, head trader at BNY ConvergEx, an affiliate of the Bank of New York, said to Reuters, referring to the U.S. central banks latest round of monetary easing.

 

"We have a pretty strong market, the economy seems to be taking advantage of a low interest rate environment. What happens when this QE3 kind of evaporates or goes away, that's the major question in the back of my mind. But right now, the economy, the market, everything looks fairly healthy. Stocks still look fairly inexpensive."

Traders, investors and analysts will be watching closely to see if the Dow manages to close at a record high, a more difficult feat that achieving an intra-day record high.

Besides the Fed's easy money policy, analysts attributed the day's surge to news that China's new administration aims to stimulate consumer spending in the world's second-largest economy and a lack of concern about how U.S. discretionary spending cuts, known as the sequester, will affect the nation's economy.

Since the beginning of the 2007-09 bear market that was brought on by the collapse of the U.S. housing market, the U.S. stock market has posted an amazing recovery, regaining basically all of the 54 percent loss it experienced in the Great Recession.

"It really does represent an achievement that we have climbed out of this crater," Jack Ablin, chief investment officer at Chicago's BMO Private Bank, which manages about $66 billion, told the Wall Street Journal.

 

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