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US stocks close at record high
The Dow Jones industrial average rose 89 points to close on Tuesday at 14,662
US stocks closed at a record high after reports on car sales and factory orders provided the latest evidence that the US economy is strengthening, while traders ploughed money back into European stocks as the financial situation in Cyprus appeared to stabilise.
Health insurers powered the gains a day after the US government released revised reimbursement rates for Medicare Advantage plans for seniors provided by private insurance companies. The new numbers suggest that funding cuts will be less severe than analysts and companies had feared.
The Dow closed up 89.16 points, or 0.6%, at 14,662.01. It had risen as high as 14,684 in the late morning. The Dow broke through an all-time record on March 5. It has risen steadily since then, routinely setting new trading highs.
The Standard & Poor's 500 index rose 8.08 points, or 0.5%, to 1,570.25. That eclipsed the index's record closing high of 1,569.19 set on Thursday. It rose to within two points of its intraday trading high of 1,576 reached on October 11, 2007.
European markets closed sharply higher on the first trading day after a tense, four-day holiday weekend. Paris's CAC-40 rose 2%, London's FTSE 100 1.2% and Frankfurt's DAX 1.9%.
The gains in Europe markets boosted confidence among US investors. While European markets were closed for four days for the Easter holiday, many traders feared that Cyprus's precarious financial situation would worsen. But no bad news materialised. Instead, Cyprus's international lenders agreed to extend until 2018 its deadline for meeting key budget targets. European markets opened higher and rose strongly after US trading began on Tuesday.
The trading day began with solid March sales reports from US carmakers. Chrysler said it sold more cars and trucks than in any month since the Great Recession began, an increase of 5%. Sales for General Motors and Ford rose 6%. Orders to US factories rose 3% in February, the best gain in five months, the government said after trading began. The increase was driven by a surge in demand for commercial aircraft, an especially volatile category.
Healthcare stocks rose the most of the 10 sectors in the S&P 500 index, adding 1.4%. The sector is up 17.1% this year. Traders were relieved about the insurers' prospects after Monday's news about Medicare Advantage rates. Preliminary data released in February had raised fears that companies offering the plans would be forced to cut benefits, increase customers' premiums or abandon some markets. This week's data suggest that may not be necessary.
Airline stocks fell sharply after Delta Air Lines said a key measure of revenue was hurt last month by government spending cuts, a technical glitch and attempts to get passengers to pay more. The industry dragged the Dow Jones transportation average down 1.2%. The index fell even more on Monday, 1.5%, after US manufacturing slowed more than economists forecast in March. The index, which includes airlines such as Delta, United and freight companies FedEx and UPS, has gained 14.7% this year.
For the second day in a row, small stocks underperformed the market. The Russell 2000 index of small-company stocks fell 4.49 points, or 0.5%, to 934.20. The Russell had risen more than large-company indexes in the first quarter, gaining 12% versus 11.3% for the Dow and 10% for the S&P. The Nasdaq composite rose 15.69, or 0.5%, to 3,254.86.
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msn money poll
New research has found that families are spending an average of £180 on back-to-school supplies for their kids. Does this tally with your experience?
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- Yes, that sounds about right to me
- Yes, but I think school supplies are getting more expensive every year
- No, the cost of new uniforms, stationery and sports kit takes us well past the £200 mark
- No, I wouldn’t spend anything like that amount on the little horrors!