At closing, the Dow was up 125.95 points, or 0.89 percent, to 14,253.77, breezing past both the intraday and closing records that were set in October 2007, just before Wall Street nearly imploded and dealt a serious blow to the U.S. economy.
It was also notable that after days of flirting with the all-time high, the Dow surged past its record largely because of news from China, where leaders said they would maintain a growth target of 7.5 percent this year and pledged to plow more money into the country’s economy. By contrast, forecasters expect the U.S. economy to grow just over 2 percent, with some warning that the across-the-board budget cuts known as the sequester could further dampen growth.
As companies rely more on earnings overseas, their fortunes have become more disconnected from the state of the U.S. economy. With the United States and Europe still seeing slow growth, many investors for the first time are expecting still-developing countries such as China to pull the rest of the world out of its economic funk.
The Dow, this country’s most famous index, tracks the stock prices of 30 multinationals, including iconic companies such as IBM, General Electric and JPMorgan Chase.
IBM, which currently carries the most weight in calculating the Dow Jones average, has seen its stock rise more than 80 percent in the past five years. More than half the company’s profits in 2011 came from overseas.
Even a company such as Hewlett-Packard, which is also on the index and has struggled in recent years, has seen its shares jump more than 40 percent this year.
The Dow’s record high confirmed that the markets have remained unfazed in the past year by the ongoing political paralysis in Washington. As lawmakers and President Obama lurch from one fiscal deadline to the next — from the debt-ceiling standoff in 2011 to the “fiscal cliff” to the steep budget cuts triggered last week — the markets have soldiered on with hardly a bump.
“The stock market and the American public are looking at the political theater with a jaundiced eye,” Ted Weisberg said from the New York Stock Exchange, where he has been a trader on the floor for more than four decades.
The markets hardly reacted Friday, when severe domestic and defense cuts started taking effect. The Dow rose 0.25 percent that day. A popular index for gauging fear in the markets, the CBOE Volatility Index, or the VIX, dropped nearly 1 percent.
“My sense is that our president and the White House are crying wolf,” Weisberg said of Obama’s warnings about the sequester last week.