US stocks ended higher with the Dow Jones Industrial Average rising to its highest level since 2007, as speculation the Federal Reserve will continue expansionary policies offset concern over spending cuts and China’s economy.
Markets were hit by headwinds from China earlier where authorities announced new-property buying restrictions Friday, ostensibly to prevent formation of asset bubbles. Restrictions include higher down payments and mortgage rates on second homes in cities that have witnessed sharp rise in property prices. Authorities also imposed 20 percent capital gains tax on sale of existing homes.
Also, data released by the Chinese government showed services industries expanded at the slowest pace since Sep. last month. Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said non-manufacturing Purchasing Managers’ Index fell to 54.5 in Feb. from 56.2 in the prior month.
In the US, a Congressional gridlock resulted in automatic spending cuts by the federal government, half of which are in defense programs. A Congressional Budget Office estimate suggested the budget cuts, known as sequestration, will cause a 0.6 percent decline in GDP growth this year.
Stocks, however, shrugged off the downbeat note after Federal Reserve Vice Chairman Janet Yellen said the Fed should press ahead with its $85 billion in monthly bond buying program while tracking the risks and costs from this unprecedented program.
The Dow Jones Industrial Average (DJIA) added 38 points to close at 14,128, barely 37 points below its record close of 14,164.53, set on Oct 9, 2007 while the S&P 500 Index (SPX) rose 7 points with utilities and consumer staples leading the gains and industrials and energy sliding the most.
Treasury prices fell, pushing up yields on 10-year notes from the lowest level in five weeks as concerns over automatic federal spending cuts eased ahead of central bank meetings this week.
The ISM non-manufacturing gauge is due for release Tuesday, followed by the Fed’s Beige Book Wednesday and the employment report Friday. Additionally, the central banks of the European Union, Japan and Britain are scheduled to meet this week.
Meanwhile, the euro slipped below 1.30 against the US dollar on Monday as caution ahead of a series of monetary policy meetings this week pushed the currency to its lowest level in more than two months.
Our Trend Tracking Indexes (TTIs) inched slightly higher from last Friday’s close with the Domestic TTI reaching +3.18% while the International TTI closed at +8.73%.
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