Stocks Returning to 'Normal' With All-Time Highs
NEW YORK ( TheStreet) -- Major U.S. stock averages surged Thursday, with the Dow and S&P 500 touching new all-time closing highs, after Federal Reserve Chairman Ben Bernanke tamed market anxieties by saying the Fed will keep its stimulus spigots open for quite some time.
Also fueling sentiment Thursday was the Treasury Budget showing a record June surplus of $116.5 billion following substantial dividend payments from Fannie Mae
"This is the getting-back-to-normal trade," Doug Cote, chief market strategist at ING Investment Management U.S., said in reference to a rising bond yields environment and strengthening equity markets. Cote said the best hedge against volatility is investment in equities.
"If the Fed tapers, equities go up; if the Fed doesn't taper, equities go up," Cote said. "I don't care,
The S&P 500 popped 1.36% to 1,675.02 after trading up to 1,676.63 and breaching its all-time closing high of 1,669.16 reached on May 21. The Dow Jones Industrial Average jumped 1.11% to 15,460.92, crossing its all-time closing high of 15,409.39. The index traded as high as 15,483.55 in the intraday.
The Nasdaq advanced 1.63% to 3,578.30.
Bernanke on Wednesday reassured markets that accommodative monetary policy would remain in place for some time regardless of any substantial drop in the unemployment rate. Bernanke emphasized there were no firm plans yet for a hike in short-term interest rates.
"There will not be an automatic increase in interest rate when unemployment hits 6.5%," Bernanke told economists after a speech in Boston.
He also said that with the low inflation environment and the job market still in need of more improvement, it will likely be "well sometime after we hit 6.5% before rates reach any significant level."
Other bright spots in the market Thursday included Japan's central bank becoming more bullish about its economy and hopes of stimulus from China's central bank. Economic releases before the market open indicated a rise in unemployment claims as well as a drop in import prices.