The bulls were out in force in the US markets yesterday as its economy received the strongest sign yet that it is on the road to making a full recovery.
The Dow Jones soared close to the 11,000 mark, reaching its highest point in over 18 months, following five weeks of consecutive growth.
It climbed 43 points, buoyed by strong reports from the service and housing industries. Services, the largest sector of the US economy, grew last month at its fastest pace in nearly four years.
The Dow Jones closed up 43.15 points, or 0.39 per cent, at 10,970.22. The Standard & Poor’s 500 was up 8.49 points, or 0.72 per cent, at 1,186.59 and the Nasdaq Index was up 23.80 points, or 0.99 per cent, at 2,426.38.
The price of government bonds was driven down, boosting the yield of the benchmark 10-year note to four per cent. This is the highest since June 2009 when it hit 4.01 per cent. The 30-year bond yield rose to 4.84 per cent on Friday.
The Institute of Supply Management said its non-manufacturing index grew ahead of expectations for the third consecutive month. It hit 55.4 after predictions of 54.1. Any figure above 50 represents growth in the sector. The rise is now consistent with GDP growth in the US. However, it still lags behind the manufacturing index, which has shot up five points.
The news follows positive data on payrolls last Friday, which showed US the job market expanding at its fastest rate in more than three years. Non-farm payrolls rose 162,000, only the third increase since the US economy plummeted into recession at the end of 2007.
US crude futures were dragged up on the back of the news, with oil rising $1.71 to $86 a barrel, as investors rubbed their hands together in expectation of high demand based on the recovery.
Even the beleaguered housing market received an unexpected boost as contracts for pending sales crept higher. The pending home sales index rose 8.2 per cent to 97.6, a big rise from the 90.2 reported in January.
The dollar dropped 0.4 per cent against the yen as traders booked profits on the back of seven-month highs earlier in the day.
The ebullient market was further boosted by strong individual performances from firms including Apple and Citigroup.