Stock rally pushes Nasdaq to record
U.S. stocks notched their biggest gains in a week Thursday, pushing the Nasdaq composite index to an all-time high.
The rally came a day after the Federal Reserve suggested that it wasn’t planning to raise interest rates right away. Ultra-low rates over the last six years have helped drive a bull market in stocks that has pushed the market to record levels.
The central bank said Wednesday that it needs to see more improvement in the economy and stronger signs of inf lation before lifting rates, reassuring investors.
“The Fed’s likely to raise rates later this year, but maybe not as aggressively as some market participants worried,” said Michael Baele, managing director and senior portfolio manager at U.S. Bank Private Client Reserve.
The Dow Jones industrial average gained 180.10 points, or 1%, to 18,115.84. The Standard & Poor’s 500 index rose 20.80 points, or 1%, to 2,121.24.
The Nasdaq added 68.07 points, or 1.3%, to 5,132.95, surpassing the most-recent high for the index of 5,106.59 set May 27.
Most major U.S. stock indexes are up for the year, but the Nasdaq is turning in the best performance. It’s up 8.4% this year, compared with a gain of 3% for the S&P 500 index and 1.6% for the Dow. The Nasdaq’s rise has been driven by technology and healthcare. In a slowgrowth world, investors are favoring stocks where earnings will be better than average. Although the Nasdaq, which tracks 2,500-plus stocks, has been steadily climbing since 2011, its ascent isn’t the crazed surge that drove it to its dot-com bubble era highs in 2000. This time the gains are underpinned by solid companies, said Stephen Freedman, senior investment strategist at UBS Wealth Management Americas. The average price-earnings ratio of the Nasdaq, a measure of how much investors are willing to pay for every dollar of earnings the companies in the index generate, is 21. When theNasdaq was at its highest, the ratio reached194. Drug developer BioMarin Pharmaceuticals and biotechnology company Radius Health were among the big gainers in the index Thursday. Both companies reported positive news on treatments still in development. BioMarin vaulted $15.06, or 12.2%, to $138.66, and Radius added $7.91, or 15.3%, to $59.64. Investors also welcomed the market debut of fitnesstracking gear company Fitbit on Thursday. The company’s stock jumped $9.68, or 48.4%, to $29.68 after pricing its initial public offering at $20 per share.