LONDON (Bloomberg) — U.S. stocks jumped, with benchmark indexes rising to all-time highs on a closing basis, as an unexpected boost in stimulus from the Bank of Japan spurred optimism in the global economy.
The Standard & Poor’s 500 Index advanced 0.9 percent to 2,013.21 as the equity markets opened in New York, topping its all-time high from Sept. 18. The Dow Jones Industrial Average rallied 103.42 points, or 0.6 percent, to 17,298.84, surpassing a record from Sept. 19. By 10:20 a.m., the Dow had stretch its gain to 0.9 percent as it stood at 17,352.11.
“The way markets are reacting, it certainly looks like news of Japan boosting stimulus was unexpected,” Kully Samra, who manages U.K. clients for Charles Schwab Corp. in London, said. His firm oversees about $2.4 trillion. “Japan’s pension fund is increasing allocation to equities and that’s helping markets today. The U.S. economy looks fine, it’s the picture outside the U.S. that was concerning. Hopefully, Japan’s stimulus helps to increase global growth.”
Japan’s Government Pension Investment Fund said it will put half its holdings in local and foreign stocks, double previous levels, and invest in alternative assets. The Bank of Japan raised its annual target for monetary expansion to 80 trillion yen, or $724 billion at current exchange, from as much as 70 trillion yen. The Topix index soared the most in a year, leading a rally in equities around the world.
Better-than-forecast corporate earnings and optimism in economic growth pushed the S&P 500 past its Sept. 18 all-time high of 2,011.36.
Equities rose Thursday after data showed the U.S. economy expanded 3.5 percent, faster than forecast, in the last quarter, signaling growth is strong enough to withstand the end of Federal Reserve bond buying.
Data showed consumer spending in the U.S. unexpectedly dropped in September as incomes rose at the slowest pace of the year, indicating the economy will have difficulty.
The S&P 500 tumbled 7.4 percent from its record though Oct. 15 on concerns that Europe could slip into a recession and that growth was slowing in China.
The latest rally began after James Bullard, president of the Fed Bank of St. Louis, said on Oct. 16 that policy makers should consider delaying the end of quantitative easing.
The Dow average closed Thursday within 85 points of its record from Sept. 19. The Russell 2000 Index of small companies ended 4.4 percent below its all-time high set in March.