tocks closed at multi-year highs yesterday, with the S&P 500 ending at its highest level since before the collapse of Lehman Brothers as investors hailed a new European bond-buying program aimed at stemming the region’s debt crisis.
Sentiment was also boosted by stronger-than-expected data on the US services sector and labour market, which was especially notable ahead of Friday’s non-farm August payrolls report.
The rally was broad, with more than three-fourths of stocks listed on both the New York Stock Exchange and Nasdaq ending higher. Materials, financials and industrials – groups tied to the pace of economic growth – led with gains of more than 2 per cent, giving the Dow index its biggest daily gain in two months and helping the Nasdaq advance to its highest since 2000.
“As clouds related to Europe start to drift off, there’s no question that there’s still juice left from here,” said Richard Weiss, a California-based senior money manager at American Century Investments. “That equities are up double digits year-to-date doesn’t deter us from remaining overweight on them for the foreseeable future.”
Tech shares helped lift the Nasdaq in its best daily performance since 27 July. SanDisk Corp climbed 8.4 per cent to $44.01 and Micron Technology added 7.8 percent to $6.68. The Dow was lifted by Walt Disney, which advanced 2.1 per cent to an all-time closing high of $51.86.
ECB President Mario Draghi, backing up his July pledge to do whatever it takes to preserve the euro, said the central bank’s plan for potentially unlimited bond-buying would address bond market distortions and “unfounded” fears of investors about the survival of the euro.
“We think this is a credible plan to addressing the issue, and while there are still political hurdles, we expect those will be addressed,” said Alec Young, global equity strategist at S&P Equity Research in New York.
US companies added staff in August at the fastest clip in five months, according to the better-than-expected ADP report, while a gauge of employment in the service sector also improved more than had been anticipated. New weekly claims for jobless benefits fell to the lowest level in a month.
Even with Thursday’s encouraging numbers, economists think the payroll report will show only modest hiring, at 125,000 new jobs, and the unemployment rate holding steady at 8.3 per cent.
The Dow Jones industrial average rose 244.52 points, or 1.87 per cent, to 13,292.00. The Standard & Poor’s 500 Index was up 28.68 points, or 2.04 per cent, at 1,432.12. The Nasdaq Composite Index was up 65.12 points, or 2.12 per cent, at 3,134.39.