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 commodities including gold and oil. 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 and reached its highest level in 13 months.

News that the Group of 20 countries will keep their 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 are waiting for more signs that the economy is recovering, they've been focusing on the dollar's moves when they make their buy and sell decisions. Investors around the world see the dollar as weaker than other currencies, and 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 the stock market's moves given the still-weak economy, and warn that stocks and other investments could suffer big losses if the dollar were to turn higher.

``It feels like it's on fumes,'' said Sean Simko, head of fixed income management at SEI Investments in Oaks, Pa., referring to the market's advance. ``Although fundamentals are catching up, they're not caught up.''

He said the dollar's drop and the current 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 giving the companies a boost when they convert profits from abroad to dollars.

The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell to its lowest level in 15 months. Investors, although still basing most of their buy or sell decisions on the economy, have also been following a pattern of funneling money into stocks when the dollar weakens and pulling it out when the currency rises.

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 prices, and investors' enthusiasm for those stocks spilled over to other industries.

According to preliminary calculations, the Dow rose 203.52, or 2 percent, to 10,226.94, its highest finish since Oct. 3, 2008. The index rose as high as 10,228.23, topping its previous 12-month trading high of 10,119.46 set last month.

The broader Standard & Poor's 500 index rose 23.78, or 2.2 percent, to 1,093.08, its sixth straight advance. The Nasdaq composite index rose 41.62, or 2 percent, to 2,154.06.

Five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.2 billion shares compared with 1.1 billion Friday.

Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note slipped to 3.48 percent from 3.50 percent late Friday.

Join the discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. In order to post comments, you must be a registered user of MiamiHerald.com. Your username will show along with the comments you post. Thank you for taking the time to offer your thoughts.

     Showing: Oldest first Newest first Most-recommended first Least-recommended first

@Nyx.AuthorDisplayName@ wrote on @Nyx.PostedAtTime@:

@Nyx.repliedToText@

@Nyx.replyAnswerText@

Reply to this Comment @Nyx.Recommender@ @Nyx.AbuseReporter@