Thursday, March 07, 2013

Dow at record high on China spend pledge
NEW YORK: The Dow Jones Industrial Average hit a record high on Tuesday as major world stock markets rallied after China pledged more government spending to boost economic growth and after data showed the US service sector expanding at its fastest pace in a year in February.
Crude oil and copper prices also advanced on China's pledge deliver economic growth of 7.5% this year in the world's second largest economy. On Wall Street, the Dow Jones Industrial Average surpassed the highs seen in 2007, before the financial crisis, breaking the previous intraday record of 14,198.1 set on October 11, 2007.
"Stocks are close to fair value, but very cheap relative to the bond market and to cash which is very expensive," said David Kelly, managing director and chief market strategist at JPMorgan Asset Management in New York.
 "Central banks have been keeping rates low and that justified higher stock prices. But we weren't seeing that because of these risks. As these risks have diminished, money is going into stocks because it has nowhere else to go. That led to the new high on the Dow Jones Industrial Average today," he said.
After the peak in 2007, stock markets crashed as the US and Europe entered a deep recession. The rebound in US equity markets has been much stronger than in Europe as the United States did not embrace the sharp government austerity measures that have hindered economic growth in Europe.