Dow Returns to 2008 Levels

Includes: DIA, SPY, UDN
by: Market Blog

By David Berman

North American stock market indexes inched higher on Wednesday, continuing a winning streak as investors gain more confidence that the U.S. Federal Reserve will leave its key interest rate at ultra-low levels even as the economy shows signs of picking up.

The latest economic data appear to support this view: U.S. producer prices fell 0.6 per cent in February, suggesting that the Fed need not be in any rush to raise rates to head off inflationary pressures. Expectations of low rates sent the U.S. dollar down, and pushed commodity prices up – rewarding commodity producers in the process.

The Dow Jones industrial average closed at 10,733.67, up 47.69 points, or 0.5 per cent. The gain, its seventh in a row, puts the index at its highest level since October, 2008 – and eradicates the dip that began in January, 2010. The broader S&P 500 closed at 1166.21, up 6.75 points, or 0.6 per cent.

Commodity producers enjoyed some of the biggest gains. Alcoa Inc. (NYSE:AA) rose 4.8 per cent, DuPont (NYSE:DD) rose 1.5 per cent and Caterpillar Inc. (NYSE:CAT) rose 1.3 per cent. As well, Ford Motor Co. (NYSE:F) rose 4.5 per cent after the Moody’s Investors Services upgraded the auto maker’s credit rating.

Some of the Dow’s big technology components lost ground though. International Business Machines Corp. (NYSE:IBM) fell 0.7 per cent and Hewlett-Packard Co. (NYSE:HPQ) fell 0.2 per cent.

As well, Blockbuster Inc. (BBI) shares – already down on their heels – fell 29.2 per cent after the video rental company announced that it may have to seek bankruptcy protection.

In Canada, the S&P/TSX composite index closed at 12,100.66, up 11.26 points, or 0.1 per cent.

Energy stocks moved higher after the price of crude oil approached $83 (U.S.) a barrel. Petrobank Energy and Resources Ltd. rose 3.7 per cent and Canadian Oil Sands Trust rose 3.2 per cent.

But financials were flat, gold producers lost some ground after the price of gold stabilized, and Research In Motion Ltd. (RIMM) dipped 1.2 per cent.