Dow industrials hit highest level in 13 months on decline of dollar

By TIM PARADIS

The Associated Press

NEW YORK — The Dow Jones industrial average stormed to its highest level in more than a year Monday as a falling dollar boosted prices for gold, oil and other commodities. Stocks also jumped as investors grew more confident that governments around the world will keep interest rates low to help the global economy.

Energy and materials stocks led the market. The major indexes rose 2 percent and the Dow jumped 200 points for the second time in three days, reaching its highest level in 13 months.

The advance was further proof that investors, at least for now, aren’t troubled by the unemployment rate, which has passed 10 percent.

News that the Group of 20 countries will keep economic stimulus measures in place signaled to investors that rates will remain low. With U.S. rates near zero, the G-20 news lessened demand for the dollar.

Even as investors wait for more signs that the economy is recovering, they’ve been focusing on the dollar when they make buy-and-sell decisions. Investors around the world see the dollar as weaker than other currencies, so they’re using it for what’s known as "carry trade," to finance purchases of investments in other countries. That trend takes the dollar down further when those purchases are made.

But some analysts are questioning investors’ stock moves given the still-weak economy and warn that stocks and other investments could suffer big losses if the dollar were to turn higher.

The market wasn’t fazed Friday by the government’s report that the nation’s unemployment rate last month rose to 10.2 percent, the first double-digit jobless reading in 26 years. Even though there are still concerns that consumers who are either unemployed or worried about losing their jobs aren’t likely to spend freely, investors took the report as another sign that interest rates will stay low.

Simko said the dollar’s drop and the surge in stocks and commodities are making it hard for investors to get a clear picture of how fast the economy is rebounding.

Still, many investors like a weaker dollar because it helps U.S. exporters by making their goods cheaper to overseas buyers and by giving the companies a boost when they convert profits from abroad to dollars.

Commodities prices, meanwhile, tend to rise when the dollar is down, so gold topped $1,100 an ounce. Crude oil rose $2 to settle at $79.43 per barrel on the New York Mercantile Exchange, helped in part by Tropical Storm Ida, which threatened the Gulf of Mexico.

Energy and materials stocks rose along with commodities, and investors’ enthusiasm for those stocks spilled over to other industries.

The Dow rose 203.52, or 2 percent, to 10,226.94, its highest finish since Oct. 3, 2008. The Dow’s gain of 455 points, or 4.7 percent, since Wednesday is its biggest four-day climb since July.

The index rose as high as 10,228.23, topping its previous 12-month trading high of 10,119.46, set last month.

Jason Pride, director of research at Haverford Investments outside Philadelphia, isn’t troubled by the slide in the dollar because he sees it as another sign that fear in the market is easing after the pounding of the past two years. Investors rushed into the dollar as they sought the safest assets.

"As the economy gets back to normal from what were very dire circumstances earlier this year, the equity markets are going to be moving up and the dollar should be falling," he said.

"You’re seeing a lot of pieces move off each other, and the dollar is driving a lot of it," he said.

Among energy stocks, Exxon Mobil Corp. (ticker: XOM) rose 69 cents, or 1 percent, to $72.85. Gold producer Newmont Mining Corp. (NEM) rose $1.52, or 3.1 percent, to $50.56 and hit a new high for the year.

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