Dow soars to record high

The Dow Jones industrial average broke through 11,900 to close at a record high today, boosted by optimism over the health of US corporate earnings.

The Dow Jones industrial average rose 95.57, or 0.81%, to close at 11,947.70. The previous record close from Tuesday was 11,867.17.

The index’s gain marked its fifth record close in two weeks. The intraday high set today was 11,959.63, eclipsing an earlier record of 11,872.94 set on Monday.

The US markets were more upbeat than on Wednesday, which saw a lacklustre start to earnings season.

Today, investors shrugged off some economic data that could stir concerns about the health of the US economy and instead focused on positive news from McDonald’s and on oil prices, which remain near lows for the year.

“In general, we’re getting friendly reports between oil inventories being up higher than expected and then some bellwether companies that are exceeding estimates,” said John Forelli, portfolio manager for Independence Investment LLC in Boston.

Broader stock indicators also moved higher. The Standard & Poor’s 500 index was up 12.88, or 0.95%, at 1,362.83, and the Nasdaq composite index showed the day’s biggest gain, advancing 37.91, or 1.64%, to 2,346.18.

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.77% from 4.78% on Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

Oil prices hovered near year lows following an Energy Department report that inventories were higher last week and amid doubts about whether Opec members will be able to agree on an immediate production cut. The price of a barrel of light, sweet crude, which settled at a low for the year on Wednesday, rose 27 cents to 57.86 on the New York Mercantile Exchange.

Investors got a look at the state of the economy with the release of the Federal Reserve’s Beige Book, which summarises regional economic activity. The report found economic growth appeared to be moderate or mixed. The findings seemed to reassure investors looking for the economy to slow at a moderate pace.

Kevin Logan, chief US economist at Dresdner Kleinwort, said the Beige Book’s tone was more optimistic than the one issued in August.

“They didn’t say there was much of an inflation problem. Investors saw this as confirmation that the Fed is on hold.”

Investors have been keeping close tabs on the Fed as they try to gauge how quickly the economy is slowing. The central bank left short-term interest rates unchanged at its last two meetings following a two-year string of 17 straight increases aimed at curbing inflation. The Fed has said it remains concerned about inflation, but the slowing economy has prompted some hopes, however slim, that a rate cut could be in the offing.

Investors paid less attention to a Commerce Department reported that showed the country’s trade deficit rose to a record $69.9bn (€55.68bn) in August, a 2.7% increase from July. Increased oil imports outpaced a record level of goods and services exports.

Logan said the markets tend to show little reaction to the trade data because, in terms of capital flows, foreign investors still prefer to hold dollars, which keeps the dollar stable.

“Without a deprecation of the dollar that forces up interest rates and inflation, then the equity market is not sensitive to changes in the monthly trade balances,” he said.

Some positive corporate news proved reassuring for some investors.

McDonald’s rose 98 cents, or 2.38%, to 42.23 after saying systemwide same-store sales, or sales at stores open at least a year, rose 9.8% in September. The world’s largest fast-food chain, and one of the 30 stocks that comprise the Dow, said its third-quarter profit would top Wall Street’s expectation.

Yum Brands, parent of the Taco Bell, Pizza Hut and KFC fast-food chains, rose 4.51, or 8.26%, to 59.08 after reporting that its third-quarter profit rose 12%, aided by growth in China. The company raised its full-year profit forecast above Wall Street’s expectation.

PepsiCo fell 1.01 to 62.85 despite posting a 71% increase in its third-quarter profit. The snack food and soft drink maker said sales rose 9% from the year-ago period, which was hurt by a tax charge. The company’s forecast, however, was about a penny short of Wall Street’s expectation.

Advancing issues outnumbered decliners roughly 4 to 1 on the New York Stock Exchange, where volume totalled 1.56 billion shares, compared with 1.59 billion shares on Wednesday.

The Russell 2000 index of smaller companies was up 15.38, or 2.07%, at 757.09.