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Dow soars to highest in more than 5 years

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Strong reports on the US housing market and durable goods orders propelled stocks higher on Wednesday, with the much-watched Dow index reaching its highest level in more than five years.

The Dow Jones Industrial Average rose 175.24 (1.26 per cent) to 14,075.37, reaching its best finish since October 12, 2007.

The broad-based S&P 500 rose 19.05 (1.27 per cent) to 1,515.99, while the tech-rich Nasdaq Composite Index jumped 32.61 (1.04 per cent) to 3,162.26.

The gains came after reports showed US pending home sales rebounded sharply in January to the highest level in almost three years.

Also, durable goods orders in January, excluding volatile aircraft, surged 1.9 per cent, with gains particularly strong in capital goods, suggesting business confidence in the economy in upcoming months.

Hugh Johnson of Hugh Johnson Advisers, said markets were also cheered by comments from Federal Reserve Chairman Ben Bernanke and European Central Bank President Mario Draghi that suggested accomodative monetary policy would remain in force on both sides of the Atlantic for the foreseeable future.

The market has also begun to conclude that mandatory US spending cuts due to take effect on Friday “does not mean the end of the world,” Johnson said. “The recognition is that the economy will continue to expand in 2013 and 2014.”

All but one of the blue-chip companies in the Dow Jones index closed the day higher.

Among the biggest gainers were JPMorgan Chase, which rose 3.5 per cent after announcing it would trim 19,000 jobs by the end of 2014.

Also gaining was aerospace giant Boeing (up 2.3 per cent), industrial giant Caterpillar (up 2.6 per cent) and technology giant Microsoft (up 1.6 per cent).

Travel website Priceline.com picked up 2.8 per cent after reporting significantly higher profits than a year ago.

Upscale handbag maker Coach jumped 2.8 per cent on speculation that the company could be an acquisition target.

Target declined 1.5 per cent despite reporting earnings that bested analyst expectations. However, the market reacted to comments that the company faces “a highly promotional retail environment and continued consumer uncertainty.”

Bond prices fell. The yield on the 10-year bond rose to 1.90 per cent from 1.88 per cent late on Tuesday, while the 30-year rose to 3.10 per cent from 3.08 per cent.

Bond prices and yields move inversely.