Dow Jones beats previous all-time high as markets shrug off US budget concerns

Dow reaches a new all-time high as investors absorb signs of recovery in US and better figures in Europe. The index has risen for four of the past five trading days, breaking the previous record of 14,164.53 set on October 9, 2007…

Powered by article titled “Dow Jones beats all-time high as markets shrug off budget concerns” was written by Dominic Rushe in New York, for on Tuesday 5th March 2013 15.41 UTC

The Dow Jones Industrial Average opened at record highs on Tuesday, bucking Washington’s budget woes and topping levels last seen in 2007.

The Dow passed 14,237 in early trading, breaking the previous record of 14,164.53 set on 9 October 2007. It looked set to break the record even before the market opened. Dow futures, a somewhat unreliable indication of the direction the market is likely to take, pushed the index higher before the opening bell as investors absorbed better-than-expected retail figures from Europe.

On Monday, the Dow closed at 14,127.82, up 38.16 points, or 0.27%, a 52-week high. The index has risen for four of the past five trading days.

The Dow has not touched these levels since before Barack Obama’s first election victory. Global stock markets went into freefall shortly after, as the implosion of housing market and Europe’s woes dragged the world into the worst financial crisis in living memory.

Massive issues remain, however. Unemployment, especially among the young, remains high, and in Washington politicians are still at loggerhead over America’s massive debts. Last Friday the government started making $85bn of cuts – known as the sequester – in a move Obama and others predicted would cause widespread chaos and financial hardship. In Europe, major US companies including GM and Ford are being hit by the region’s continuing economic crisis.

But these are old debates now – and Wall Street doesn’t seem to be worried.

Gus Faucher, a senior economist for PNC Financial Services Group, said Washington still mattered and warned that if the sequester drags on, the Dow’s gains could be at risk. “That said, the fundamentals are better. Profits are at an all-time high, business balance sheets have improved, interest rates are low. The markets are expecting more growth through 2013.”

Jack Ablin, chief investment officer at BMO Bank, said investors fed up with low yields from the bond markets were looking for better returns in equities. Bonds were also being issued in order to buy shares, he said. He said the wider economy looked like it was steadily improving, but warned there could be problems ahead.

“Investors are embracing progress. They weren’t shaken by the tax hikes at the end of the year and not by the sequester either,” he said. “The Dow looks fairly priced now.”

But he warned that the Federal Reserve’s massive bond-buying policy could drive more people into equities. “If you want to see a swift end to monetary easing, another 10-20% hike in the Dow will probably do that,” he said.

Minutes of the Fed’s last meeting revealed a split in the central bank’s rate setting committee. While the Federal Open Markets Committee’s members were still worried about unemployment, “many participants also expressed some concerns about potential costs and risks arising from further asset purchases,” according to the minutes. © Guardian News & Media Limited 2010

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