Dow Jones industrial surges to new record
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 US 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 United States 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 US economy has not fared nearly as well. Unemployment was just 4.7 per cent when the Dow last reached a record, versus 7.9 per cent now.
Stocks have rallied powerfully this year, impressing even market's most ardent sceptics, 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 nine per cent 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 US central bank is buying US$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.
On Tuesday, investors received another piece of positive news on the US economy, a report that US 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.
The Dow's gain early Tuesday was equivalent to one per cent. If it stays this high, it will finish above its record high close of 14,164 set on October 9, 2007.
The Dow eventually closed at 14,253.77 points.