New York: A broad US stocks rally sent the Dow industrials to a 13-month high on Monday, after the Group of 20 pledged to keep aid flowing to the world economy, strengthening investors’ desire for risk.
The agreement by G-20 finance ministers and central bankers over the weekend to keep stimulus in place boosted global stocks on the expectation of prolonged low interest rates.
The US dollar briefly fell to a 15-month low, bolstering commodity prices and materials stocks. Freeport MacMoRan Copper & Gold Inc shares shot up 4.6% to $83.20 and the S&P materials sector index gained 3.2%.
“Central banks around the world are continuing to prop up the economy and support risk taking. There’s very little regard for valuation,” said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. “It looks to me like a pure risk rally and it is consistent with the G-20 comments.”
Shares of chipmakers rose sharply, with the PHLX semiconductor index up 3.2%, its largest increase in a month. On Monday, Wells Fargo raised its 2010 growth projection for chipmakers.
Among chipmaker shares, Applied Materials Inc rose 5.2% to $12.98 on Nasdaq and Micron Technology Inc shot up 6.1% to $7.51 on the New York Stock Exchange.
The Dow Jones industrial average jumped 203.52 points, or 2.03% to 10,226.94. The Standard & Poor’s 500 Index rose 23.78 points, or 2.22 %, to 1,093.08. The Nasdaq Composite Index gained 41.62 points, or 1.97 %, to 2,154.06.
Lower interest rates worldwide make investing in risky assets like stocks more attractive, and reduce the cost of corporate financing used for investment.
Financial stocks were also top performers in the session, with shares of American Express Co up 4.9 % at $39.05. The KBW bank index gained 3.6 %.
Corporate mergers and acquisitions also helped the market, with General Electric Co up 3.4 % at $15.85 after a source said GE and Comcast Corp agreed on a valuation of around $30 billion for a joint venture between NBC Universal and Comcast.
Sprint Nextel Corp stock soared 20.4 % to $3.43 after news it is preparing to pump at least $1 billion more into wireless broadband company Clearwire Corp, according to the Wall Street Journal.
Volume was moderate on the New York Stock Exchange, with 1.24 billion shares changing hands, below last year’s estimated daily average of 1.49 billion, while on the Nasdaq, about 2.03 billion shares traded, below last year’s daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 5 to 1, while on the Nasdaq, nearly nine stocks rose for every four that fell.