The stock market, which has been marching higher for a week, got extra fuel on Thursday after the chairman of the Federal Reserve said the central bank would keep supporting the economy.
The Dow Jones industrial average and Standard Poor’s 500-stock index surged to nominal highs, and the yield on the 10-year Treasury note continued to decline.
Stocks from companies that benefit most from a continuation of low interest rates, like home builders, recorded some of the biggest gains.
The Fed chairman, Ben S. Bernanke, made the comments in a speech late Wednesday after American markets had closed, saying the economy needed the Fed’s easy-money policy “for the foreseeable future.”
The economy needs help because unemployment is high, Mr. Bernanke said. His remarks seemed to ease investors’ fears that the central bank would pull back on its economic stimulus too quickly.
The Fed is buying $85 billion a month in bonds to keep interest rates low and to encourage spending and hiring.
Stock index futures rose overnight. Stocks surged when the market opened on Thursday and stayed high for the rest of the day.
“It’s back to the old accommodative Fed, so the markets are happy again,” said Randy Frederick, managing director of Active Trading and Derivatives at the Schwab Center for Financial Research.
The market pulled back last month after Mr. Bernanke laid out a timetable for the Fed to wind down its bond-buying program. He said the central bank would most likely ease back on its monthly purchases if the economy strengthened sufficiently.
On Thursday, the S. P. 500 index jumped 22.40 points, or, 1.4 percent, to 1,675.02, surpassing its previous high close of 1,669 from May 21. The index rose for a sixth consecutive day, its longest streak in four months.
The Dow rose 169.26 points, or 1.1 percent, to 15,460.92, above its own previous high of 15,409, set May 28.
The Nasdaq composite rose 57.55 points, or 1.6 percent, to 3,578.30.
In government bond trading, the benchmark 10-year Treasury note increased 27/32 to 92 29/32; its yield fell to 2.57 percent, from 2.67 percent on Wednesday. The yield was as high as 2.74 percent on Friday after the government reported strong hiring in June. Many traders took that report as a signal that the Fed would be more likely to slow its bond purchases sooner rather than later.
The Fed has also said it plans to keep short-term rates at record lows, at least until unemployment falls to 6.5 percent. Mr. Bernanke emphasized on Wednesday that the level of unemployment was a threshold, not a trigger. The central bank might decide to keep its benchmark short-term rate near zero even after unemployment falls that low.
Corporations began reporting earnings this week for the second quarter, which ended 11 days ago. SP Capital IQ forecast that companies in the S. P. 500 would report average earnings growth of 3 percent compared with the second quarter last year.
The price of gold gained for a fourth straight day, climbing $32.70, or 2.6 percent, to $1,280.10 an ounce, after falling close to a three-year low. Gold is rising because the prospect of continued stimulus from the Fed could weaken the dollar and increase the risk of inflation. That, in turn, increases the appeal of gold as an alternative investment.
Article source: http://www.nytimes.com/2013/07/12/business/daily-stock-market-activity.html?partner=rss&emc=rss
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