Dow Hits High for Year as Dollar Weakens

Dow Hits High for Year as Dollar Weakens
By JAVIER C. HERNANDEZ
Copyright by The New York Times
Published: November 9, 2009
http://www.nytimes.com/2009/11/10/business/10markets.html?_r=1&emc=na


Wall Street raced out of the gate on Monday and ended the day at highs for the year.

But along the way, the dollar weakened, and as a result, prices for commodities like gold continued to rise.

Shares on all three continents rose after finance ministers said over the weekend that they would push ahead with efforts to revive economic growth through interest rates and increased government spending. The Dow Jones industrial average ended the day more than 200 points higher.

At the same time, the ministers offered no assurance that they would take steps to support the dollar. That weakened the currency, and the dollar fell to $1.50 against the euro, the first time it has reached that threshold since late October.

In turn, gold rose to record levels, hitting $1,105.20 an ounce. Last week, it climbed nearly 5 percent, buoyed by news that India had bought 200 tons of gold from the International Monetary Fund. Oil also rose, settling $2.02 higher at $79.45 a barrel.

“Economic and financial conditions have improved following our coordinated response to the crisis,” said a statement from the finance ministers of the Group of 20, comprising the world’s wealthiest nations, who met over the weekend in St. Andrews, Scotland. “However, the recovery is uneven and remains dependent on policy support.”

Brian Dolan, chief currency strategist for Forex.com, said the silence from the G-20 finance ministers on the dollar turned a grim prognosis even bleaker. Mr. Dolan said investors were abandoning the currency because of low interest rates in the United States and concern that its deficits would continue to swell.

“A lot of it is sentiment-driven and there the dollar is getting a vote of no confidence,” Mr. Dolan said. “The massive borrowing by the U.S. government is undermining confidence in the longer-term outlook for the dollar.”

Investors appeared to be directing their focus to riskier equities and turning away from the currency markets. The dollar is considered a low-yield investment, given the historically low interest rates in the United States. Last week, the Federal Reserve gave no indication that it planned to raise interest rates anytime soon, leaving investors to reroute their funds toward the stock market, oil and gold.

While the faltering dollar will make imports more expensive for American consumers, it will also make American exports more competitive overseas.

The G-20 finance ministers said they were concerned by rising unemployment, even as the broader economy strengthens. In the United States, the unemployment rate reached a 26-year high of 10.2 percent in October, surprising economists and investors.

At the close, the Dow Jones industrial average was up 203.52 points, or 2 percent — its highest level in a year, beating the previous record on Oct. 21. The Standard and Poor’s 500-stock index was up 23.78 points, or 2.2 percent, and the technology-heavy Nasdaq composite index was up 41.62 points or 1.97 percent.

The rally was broad-based, led by financial companies as well as industrial, chemical and mining stocks. Shares of the General Electric Company rose 3.5 percent after reports that G.E. and the Comcast Corporation had agreed to value NBC Universal at about $30 billion as the companies discuss a joint venture.

Shares of Citigroup were up 2.7 percent while Bank of America rose 4.7 percent and Wells Fargo rose 4.2 percent.

M. Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Okla., attributed the gains overall to a renewed appetite for risk.

“When you have zero percent inflation, zero percent interest rates, zero percent money markets rates, and when you have metals and gold that have skyrocketed to astronomical levels, stocks look pretty good in comparison,” he said.

Overseas markets were also up. The FTSE 100 in Britain closed 1.8 percent higher, the CAC 40 in France was up 2.1 percent, and the DAX in Germany was 2.4 percent higher.

Overnight, the Nikkei average in Japan closed 0.2 percent higher, and the Hang Seng in Hong Kong climbed 1.7 percent.