U.S. stocks soared Tuesday, with the blue-chip Dow Jones Industrial Average smashing the psychologically important 18,000 milestone for the first time after the U.S. economy grew at its quickest pace in more than a decade last quarter.
In afternoon trading, the Dow, which measures the share prices of 30 large industrial companies, jumped 108.88 points, or 0.61 percent, to a new intraday record high of 18,068.32; the S&P 500 stock index, which tracks the share prices of the nation’s 500 largest publicly traded companies, added 5.61 points, or 0.27 percent, and rose to a record intraday high of 2,085.61. The tech-heavy Nasdaq Composite fell 13.54 points, or 0.28 percent, to 4,767.88.
Data Tuesday showed consumer spending, which accounts for nearly two-thirds of the U.S. economy, jumped to its largest gain in three months in November as falling gasoline prices has left more discretionary income in consumers’ pockets during the holiday shopping season. Consumer spending rose 0.6 percent last month while October was upwardly revised to a 0.3 percent increase, the Commerce Department said Tuesday.
Meanwhile, U.S. consumer sentiment jumped to its highest level in nearly eight years as cheaper gasoline prices boosted consumer optimism. Consumer sentiment rose to 93.6, its highest reading since January 2007, according to the University of Michigan’s final December reading.
Consumer optimism has steadily picked up in the last few months as gasoline prices continue to fall. Global oil prices have declined over 46 percent in the last six months to $60.45 a barrel Tuesday, which has sent gasoline prices tumbling. The averages price of gas across the U.S. is currently $2.361 a gallon, according to Gasbuddy.com.
After global oil prices rebounded from five-year lows last week, crude prices edged higher Tuesday. West Texas Intermediate crude, the benchmark for U.S. oil prices, rose 1.01 percent Tuesday to $55.82 per barrel, for Jan. 15 delivery, on the New York Mercantile Exchange. Global benchmark Brent crude edged up 0.57 percent Tuesday to $60.45 a barrel on the London ICE Futures Exchange.
Separate data on Tuesday painted a mixed picture on the U.S. housing market as sales of new single-family homes fell for a second straight month in November. Sales fell 1.6 percent to a seasonally adjusted annual rate of 438,000 units, the Commerce Department said Tuesday. Last months figures declined 1.6 percent from October’s report, which was revised down to 445,000 units from 458,000 units.
The Dow hit 18,000 following the opening bell Tuesday, largely driven in part by stronger-than-expected data that revealed the U.S. economy grew at its fastest pace in 11 years. U.S. gross domestic product rose at a seasonally adjusted annual rate of 5 percent in the third quarter, Commerce Department said in its third and final estimate Tuesday. The figure beating economists’ expectations for the U.S. economy to grow at a 4.3 percent annual pace, according to analysts polled by Thomson Reuters.
The revision was mainly due to the pace of consumption growth being revised up to 3.2 percent from 2.2 percent.
“The clear strengthening in activity towards the end of 2014 may prompt some Fed officials to consider whether they need to raise rates before the middle of 2015,” Paul Dales, senior economist at Capital Economics, said in a note Tuesday.
However, a separate report showed durable goods orders unexpectedly dropped $1.7 billion, or 0.7 percent, last month to $242.3 billion, which was the third decline in the past four months. Excluding volatile aircraft and defense orders, a key category that economists use as a gauge for business investment spending, remained unchanged from the previous month after the figure was revised down to a 1.9 percent drop in October.
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