Dow Jones at its highest level in 13 months

Stocks on Wall Street recorded strong growth on Monday, with the Dow Jones index reaching its highest level in 13 months, thanks to increased investor optimism regarding the continued influx of cheap money to support economic recovery, as announced by the G-20 group.

The Dow Jones index rose by 203.52 points, or 2.03 percent, to 10,226.94 points, š marking its highest value since October 3, 2008, and the second surge of 200 points in the last three trading days. The Dow has increased a total of 4.7 percent in the last four trading days, following a statement from the Federal Reserve (FED) on Wednesday that alleviated fears that the U.S. central bank might soon raise interest rates. Of the 30 components of the Dow Jones, 29 rose, led by American Express with a 4.9 percent increase. Caterpillar’s stock added 4.2 percent, while General Electric rose by 3.4 percent. The only decline was seen in Kraft Foods’ stock, which fell by 0.9 percent after British Cadbury rejected Kraft’s hostile takeover bid worth $16.3 billion, stating that it "does not remotely reflect the true value of the company."

The broader Standard & Poor’s 500 index added 2.2 percent, reaching 1,093.08 points, with gains recorded across all sectors. The financial sector led with a 3.6 percent increase, due to expectations that low interest rates will allow banks to generate profits in the coming months, while the materials sector rose by 3.2 percent as investors moved away from the weakening dollar and shifted into commodities. The technology index Nasdaq rose by 41.62 points or 1.97 percent, finishing trading at 2,154.06 points. The Russell 2000 index of smaller companies increased by 2.1 percent. Gold reached a new record, and oil prices rose again with the weakening dollar. The dollar fell against all six foreign-denominated currencies, except for the Japanese yen, and at one point reached its lowest value in the last 15 months. Futures contracts for oil rose by $2, or 2.6 percent, to $79.43 per barrel on the New York commodity exchange, following concerns about potential damage to oil platforms and pipelines in the Gulf of Mexico from Tropical Storm Ida. The price of gold reached a record $1,100.80 per ounce, with an increase of $5.70 or 0.52 percent for delivery in November.

The agreement among finance ministers and central bank governors of the G-20 group, reached over the weekend in London, whereby many countries will maintain fiscal incentives for economic recovery, has spurred global stock growth in anticipation of a prolonged period of low interest rates. A record auction of $40 billion in three-year U.S. Treasury bonds, which generated strong demand, suggests that the U.S. government will be able to finance its economic recovery efforts at favorable prices, according to The Wall Street Journal. "It is clear that we are pulling some people out of inactivity as the market rises," Joe Williams, director of equity strategy at Commerce Trust, told WSJ. "But I think there is room for this to last for a while. We could probably go another 300 to 500 points before valuations become really stretched," Williams added. Currency strategist Bob Lynch from HSBC Bank USA in New York stated that investors renewed their appetite for riskier investments such as stocks or commodities on Monday, driven by dollar selling. "It is surprising that we did not see a similar move last week," right after the FED signaled that it would maintain low interest rate policy for some time," Lynch told The Wall Street Journal. (H)