The Dow Jones industrial average soared to a record closing high on Tuesday, breaking through levels last seen in 2007 and as investors rushed in to join the party in anticipation of more gains.
Signs of a strengthening economy, continued support from the Federal Reserve, and fairly attractive valuations compared to other assets have boosted the Dow by almost 9 percent so far this year. A strong reading in the services sector, which accounts for the bulk of economic activity, was the latest indicator of improving demand.
“I’m surprised at the speed of the gains, which have come at a pace that we can’t annualize. But stocks are still not expensive, and we can expect to continue getting a reasonable advance from here,” said Jim McDonald, chief investment strategist at Chicago-based Northern Trust Global Investments, who helps oversee USD 760 billion in assets.
Gains came across the board, with 10 of the Dow’s 30 component stocks reaching new 52-week highs on a day when 456 securities hit new yearly highs on the New York Stock Exchange. The Dow Jones Transportation Average also closed at a new high after rising 1.5 percent.
About 71 percent of the NYSE stocks closed higher while 67 percent of Nasdaq-listed shares ended in positive territory. About 6.41 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, slightly below the daily average so far this year of about 6.48 billion shares.
About 16.9 million contracts changed hands in the US options market on Tuesday, according to options analytics firm Trade Alert. The turnover consisted of 8.90 million calls and 8.01 million puts. The overall option turnover was in line with last month’s daily average of 16.89 million contracts.
The blue-chip Dow’s forward 12-month price-to-earnings ratio was at 15.87, compared with 16.99 during the 2007 highs, according to Thomson Reuters Datastream. The S&P 500′s price-to-earnings ratio was at 13.5.