(Photo: Spencer Platt, Getty Images)
by Adam Shell, USA TODAY
NEW YORK -- The Dow Jones industrial average gained 0.6% to close above 15,000 for the first time ever on Tuesday as stocks' long upward climb continued. The S&P 500, which gained 0.5% on the day, also had a record close.
Rob Lutts, chief investment officer at Cabot Money Management, says investors are reacting to a slow but steady improvement in the U.S. economy and he expects more gains ahead. According to his calculations, the market is 15% undervalued, Lutts says.
"The basic underlying foundation of the economy is a lot stronger than many people believe," says Lutts, adding that the economy is getting a big boost from the rebounding housing market and the nation's increasing push to become more energy efficient.
The fact that many investors, both on Main Street and institutional investors, remain underweight in stocks is also a plus, as it means the market should continue to get fresh flows of cash as investors look to take part in the rally and exit conservative assets that are yielding little if anything at all.
Lutts balks at talk that the market's new highs are a sign that it can't rise much more.
"The stock market is essentially back where it was 12 or 13 years ago," he says. "And when you look at it that way, you could have some good catch-up in performance."
Overseas Tuesday, Japanese stocks outperformed all others as traders returned from a public holiday in buoyant mood, sending the Nikkei stock index above 14,000 for the first time in nearly five years.
The Nikkei surged 3.6% to 14,180.24 on its first day of trading following the Golden Week holiday - that's the first time the Nikkei has breached the 14,000 mark since June 2008.
Japanese stocks have been marked up heavily after the Bank of Japan announced a new aggressive monetary policy to get the country out of its near two-decade stagnation. One repercussion of the plan to pump huge amounts of yen into the Japanese economy has been to sharply weaken the currency. A lower yen is boosting economic growth by making the country's exports cheaper in international markets.
Elsewhere, investors remained largely positive amid a dearth of scheduled economic and corporate news, as they continued to draw encouragement from Friday's better than anticipated U.S. payrolls figures. The data often set the market tone for a week or two after their release.
In Europe, the FTSE 100 index of leading British shares as up 0.3% at 6,540 while Germany's DAX rose 0.6% to 8,164. The CAC-40 in France was 0.4% higher at 3,921.
"Wall Street may be eyeing a relatively unchanged start to Tuesday, but there's no denying the current levels remain bullish and the fact the S&P is holding above 1,600 is certainly worthy of note," said Fawad Razaqzada, market strategist at GFT Markets.
The dollar was also fairly steady after gaining in the wake of the payrolls data. The euro was flat at $1.3075 while the dollar was 0.2% lower at 99.19 yen.
Earlier in Asia, Hong Kong's Hang Seng rose 0.6% to 23,047.09, while South Korea's Kospi fell 0.4% to 1,954.49 . Mainland Chinese shares were higher. The Shanghai Composite Index gained 0.2% to 2,235.58 and the smaller Shenzhen Composite Index added 0.1% to 955.33.
Australia was in focus after the Reserve Bank of Australia lowered its official interest rate by a quarter percentage point to 2.75% amid some signs the economy is coming off the boil as the Australian dollar rises. Following the reduction, the Aussie dollar fell 0.9% to $1.0169. However, the S&P/ASX 200 stock index fell 0.2% to 5,143.70.
Oil prices drifted lower after a strong run, with the benchmark New York rate down 63 cents at $95.53 a barrel.
On Monday, U.S. stocks ended mixed. The Dow fell less than 0.1% to 14,968.89. The S&P 500 rose 0.2% to 1,617.50. The Nasdaq composite index rose 0.4% to 3,392.97.
Contributing: Associated Press
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