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Dow Jones Industrial Average hits 17,000 for first time | Dow Jones Industrial Average hits 17,000 for first time |
(35 minutes later) | |
The Dow Jones Industrial Average - a US stock index made up of some of the biggest global firms - has hit 17,000 for the first time. | The Dow Jones Industrial Average - a US stock index made up of some of the biggest global firms - has hit 17,000 for the first time. |
On Thursday, investors pushed shares higher after a better-than-expected jobs report showed the US economy added 288,000 jobs in June. | On Thursday, investors pushed shares higher after a better-than-expected jobs report showed the US economy added 288,000 jobs in June. |
Overall, low interest rates have led investors to pour money into stocks in an effort to make a profit. | Overall, low interest rates have led investors to pour money into stocks in an effort to make a profit. |
That has pushed US indexes - including the S&P 500 - to new highs in 2014. | That has pushed US indexes - including the S&P 500 - to new highs in 2014. |
On Wednesday, the Dow closed at its 13th record for the year, and the S&P 500 hit its 24th closing high for 2014. | On Wednesday, the Dow closed at its 13th record for the year, and the S&P 500 hit its 24th closing high for 2014. |
Slow but steady | |
A string of positive economic news combined with increasing merger and acquisition activity has buoyed investor confidence on Wall Street. | |
Investors had been worried that rising stock prices could not be supported by actual underlying economic growth. | |
Thursday's positive jobs figure capped a week of good reports globally, including news that China's manufacturing activity hit a six-month high in June. | |
That has help lift stocks in the short term, even as US markets slow down for the 4th of July holiday. | |
Low rates | |
Overall, investors have been pouring money into stocks over the past year and a half, partially as a result of the policies of the Federal Reserve. | |
The US central bank has taken extraordinary measures to keep interest rates low in an effort to encourage banks to lend and thus stimulate economic growth. | |
Low interest rates, however, have also meant that firms are less inclined to keep extra cash on hand where it is not earning money. | |
That has spurred increased merger and acquisition activity, with firms in the pharmaceutical, food processing, and technology industries all announcing strings of acquisitions in recent weeks. | |
Investors have also looked to the stock market to boost returns as they have looked beyond bonds. | |
Some have worried that in keeping rates so low, the Federal Reserve is encouraging a bubble in the stock market. | |
However on Wednesday, Fed chair Janet Yellen said in a speech in front of the International Monetary Fund (IMF) that the central bank would not raise rates in an effort to deter financial excesses. | |
"Efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment," she said. |