Thread: DOW at fresh 18-month closing high

DOW at fresh 18-month closing high

By PETER A. MCKAY

Strong economic data pushed the Dow Jones Industrial Average to a fresh 18-month closing high, but the measure couldn't quite make it above the key 11000 level.

Energy, basic-materials, and industrial sectors led the rally, though the gains were limited by investors' jitters about the upcoming earnings season and the potential for inflation later in the year as the U.S. rebound gathers steam.

The Dow Jones Industrial Average posted a gain of more than 60 points at its intraday peak, then lost steam the rest of the way, ending with a 46.48-point gain, up 0.4%, at 10973.55, the highest close since Sept. 26, 2008.

The market has struggled to build upon early gains in several recent sessions. Most traders are elated to see the U.S. economy adding jobs at the strongest pace in three years, with other big-picture yardsticks improving as well, including encouraging new reports on home sales and U.S. service-sector activity released Monday.

At the same time, many participants are also growing antsy about when the Federal Reserve might raise its key federal-funds rate and whether the economic growth so far will allow companies to deliver the profit growth that people have been betting on for months.

"The best scenario for the market right now isn't a rapid economic recovery; it's a gradual one that allows interest rates to stay low for a long time," said strategist David Bianco of Bank of America Merrill Lynch. "For now, that seems to be what we're getting."

The Nasdaq Composite Index was up 1.1%. Apple rose 1.1% after the company said it sold more than 300,000 iPads in the U.S., including pre-orders, on the first day the device was available. Best Buy, which is carrying the iPad, rose 1.9%.

The S&P 500 rose 0.8%, led by a a 1.6% gain in its energy sector, which was boosted by a jump in oil prices. Futures rose $1.75, or 2.1%, to settle at $86.62 a barrel in New York.

Also helping the energy sector, SandRidge Energy said Sunday that it is acquiring west Texas rival Arena Resources. Arena leapt 7.2% on the news, while SandRidge was off 3.4%.

As investors flocked to stocks and commodities, Treasury prices suffered. The benchmark 10-year Treasury yield touched 4% for the first time since June.

Following a meeting Monday, Fed officials made no announcement regarding the discount rate on emergency loans to banks.

But as always, the even bigger focus for traders is the Fed funds rate, which has hovered around zero for more than a year. Though no one on Wall Street believes a hike of that target is imminent, some traders believe that a sustained run above 4% for the 10-year Treasury yield could put increased pressure on the central bank to act.

"The Fed is clearly reluctant to have an immediate uptick in rates as long as the jobs picture looks challenging," with the unemployment rate still hovering at 9.7%, said analyst Richard Peterson, of Standard & Poor's. "At the same time, it's important to keep things moving ahead slowly, to keep inflation in check."

The dollar strengthened against the euro but was lower against the yen.

http://online.wsj.com/article/SB1000142 ... Collection

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