Dow posts gains on recovery hopes
THE Dow Jones industrial average climbed to its highest close in 14 months on yesterday as a weak dollar boosted natural resource companies’ shares and economic data reinforced hopes for a sustainable recovery.
Sentiment also got a lift as concerns receded about the impact of Dubai’s debt trouble after news that Dubai World planned to restructure about $26bn in debt.
The dollar’s decline bolstered shares of commodity-oriented companies like US Steel, up 1.2 per cent at $45.18; Alcoa, up 2.2 per cent at $12.80, and Newmont Mining, up 3.8 per cent at $55.66.
Data showed pending sales of previously owned US homes rose more than expected to their highest level in 3-1/2 years in October. The Dow Jones home construction index gained 1.3 per cent.
“People are starting to realise that things are coming back. There are some pockets of weakness, but overall, we’re healing globally, and the overall trend is very positive,” said Thomas Belesis, chief executive officer at John Thomas Financial.
Concerns over a possible debt default by Dubai World triggered a sell-off in stocks globally on Friday.
“Friday’s fears about Dubai were overblown … Investors know the situation is out there, but they’re putting that aside,” Belesis said.
The Dow Jones industrial average shot up 126.74 points, or 1.23 per cent, to end at 10,471.58. The Standard & Poor’s 500 Index rose 13.23 points, or 1.21 per cent, to 1,108.86. The Nasdaq Composite Index advanced 31.21 points, or 1.46 per cent, to close at 2,175.81.
The US dollar index fell 0.6 per cent as waning anxiety about Dubai limited the greenback’s safe-haven appeal. The index measures the dollar’s performance against a basket of major currencies.
US crude oil futures gained $1.09 to settle at $78.37 a barrel, while the S&P Energy Index advanced 1.4 per ent. Shares of Exxon Mobil shot up 1.3 per cent to $76.04.
In the day’s housing data, sales advanced to their highest level in 3-1/2 years, according to a report from the National Association of Realtors.
Other data showed construction spending was flat in October, above the expectation for it to slide in the month. In addition, the Institute for Supply Management said that the manufacturing sector expanded in November, though the expansion was less than expected.
Staples rose 4.8 per cent to $24.44 after it beat expectations.