What do you get when you combine a strong jobs report plus a promising beginning to earnings season, and soothing words from Fed Chairman Ben Bernanke? A new record closing high for the Dow Jones Industrial Average (^DJI 0.61%), of course.
The blue chips jumped 169 points today, or 1.1%, to close out at 15,460, topping the previous closing high of 15,409 that it hit on May 28 of this year. The S&P 500 also hit a new closing high. The Dow's intraday high from May 22, of 15,542, still stands. Today's surge came as Ben Bernanke said that the Fed's accommodative monetary policy would stay in place in order to lower the unemployment rate, which currently sits at 7.6%. It should come as no surprise to see the markets respond like this, as investors have been obsessed with monetary policy since Bernanke first seriously floated the idea of tapering the central bank's $85 billion a month bond-buying program on May 22. His recent statement seems to indicate that the Fed will not be hasty in reducing the stimulus.
Elsewhere, initial unemployment claims, the day's only significant economic report, came in higher than expected, hitting 360,000 against the analyst consensus of 345,000.
Homebuilders were among the day's biggest winners, as at least six of them jumped 7% or more on Bernanke's words. Interest rates have soared in recent weeks, as investors feared the taper could hurt the economic recovery and raise bond yields as the Fed reduces its purchases of treasury bonds. However, treasuries now seem likely to remain low for the foreseeable future and, therefore, mortgage rates should also remain low.
On the Dow today, all 30 components gained, with tech stocks leading the way, as Intel (INTC +2.56%) and Microsoft (MSFT 0.25%) were up 3.2% and 2.8%, respectively. Intel's gain was, perhaps, driven by a report that said PC sales declined by less than expected last quarter, as computer shipments fell 11% instead of the 14% that economists had expected. That's a good sign because the chip maker is heavily dependent on PC demand. Microsoft, meanwhile, was up, as the company unveiled a major revamp today. CEO Steve Ballmer said the software giant would be organized around functions and development rather than products. The transition should streamline Windows capability for mobile products. Still, the reorganization puts more power in the hands of CEO Steve Ballmer, who has been criticized in the past for a lack of innovation, among other things.
Tomorrow, Wells Fargo and JPMorgan Chase will report earnings before the bell. Look for those results to set the tone for the day. The market is expecting EPS of $0.93 for Wells, and $1.44 for JPMorgan.
