Dow Jones Index Hits All-time High on Stimulus and Corporate Profits

The Dow Jones Industrial Average reached its record level ever on Tuesday, raised by expectations of stimulus from the Federal Reserve and a rebound in corporate profits.

The 116-year-old index exceeded the 14,000 mark for the first time since 2007. Photo: Noel Y. C./Flickr

America’s blue chip index rose 118 points in Tuesday trading to 14,246, erasing all the losses from the financial crisis of 2008.

The Dow Jones Industrial Average rose to a closing high of 14,164 on the October 9, 2007, about a year before the Lehman Brothers’ collapse brought the financial system across the globe close to the cliff.

The index kept on falling for the next 17 months as the full-impact of the sub-prime crisis unfolded, hitting a low of 6547 on March 9, 2009, The Telegraph reports.

Joe Rundle, head of trading at ETX Capital, commented on the issue: “A run of better-than-estimated economic data has overshadowed concern over federal spending cuts known as the Sequesters. It feels as if investors are of the view that a $15 trillion economy can withstand $85bn worth of spending cuts.”

“In fact, it could be said that for stock markets, the Sequesters have acted a positive catalyst, fuelling this rally we are currently seeing.”

In ten minutes America’s blue chip jumped to 14,222.13 points, well past the previous high of 14,198.10 set on October 11, 2007.

Beside more than $2.3 trillion of Fed stimulus, equities also have also raised due to strong growth in corporate profits over the past few years.

American Express, Caterpillar and Home Depot have led the Dow’s rally since its fall in 2009, climbing more than 275pc as the economy recovered from the worst recession of the past decades.

According to reports, almost $10 trillion has been restored to US equities in that time.

Sentiment today was buoyed by comments came from Janet Yellen, vice chairwoman of the Fed board of governors, who revealed that the central bank intends to “keep monetary policy highly accommodative until well into the recovery”.

The news about the record high of the index lifted markets in Europe, with London’s FTSE 100 gaining 1.26pc to 6,425 points, Frankfurt’s DAX ralling 1.98pc and the CAC 40 in Paris adding 1.7pc. Madrid and Milan advanced 1.8pc and 2.2pc respectively.

“Despite continued lousy economic data, from Europe in particular, investors continue to take comfort from the fact that the Federal Reserve looks set to keep its foot hard on the stimulus pedal,” said Michael Hewson, analyst at CMC Markets trading group.

Other, broader market measures still have a ways to go. The Standard & Poor’s 500-stock index still remains on the mark of about 30 points away from its record high of 1565.15, also set on Oct. 9, 2007.

And the Nasdaq Composite Index stopped at about 3215, still years away from its record high of 5048.62, set on March 10, 2000, back in its dot-com glory days.

As The Huffington Post writes, those indices indicate the stock market as a whole. Though the index is better known, and claims “to provide a clear, straightforward view of the stock market and, by extension, the U.S. economy,” it has some big flaws.

Global equities had already been lifted earlier today  by China’s pledge to support economic expansion, targeting growth of 7.5pc this year.

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