New York • The last time the stock market was this high, the Great Recession was just getting started and stocks were pointed toward a head-first descent.
But on Thursday, the market moved swiftly in the other direction. The Standard & Poor’s 500 index soared to its highest level since January 2008, and the Dow Jones industrial average hit its highest mark since December 2007.
A concrete plan to support struggling countries in Europe provided the necessary jolt, and the gains were extraordinarily broad. European markets surged and U.S. Treasury bond prices dropped as traders sold low-risk investments. All but 13 stocks in the S&P 500 index rose.
"There’s just a sea of green," said JJ Kinahan, TD Ameritrade’s chief derivatives strategist. "It’s pretty fun."
At a long-awaited meeting Thursday, Mario Draghi, the president of the European Central Bank, unveiled a program to buy government bonds from the region’s struggling countries with the aim of lowering their borrowing costs. Draghi said the program will have no set limit on how much it can buy.
Kinahan praised Draghi for two details in the plan. He didn’t declare a limit for the bond-buying program and said it wouldn’t put itself first in line in the event of a default, something for which investors had been clamoring. Both details should make other investors more willing to buy government bonds, along with the ECB.
The program announced Thursday goes well beyond the ECB’s earlier, $264 billion bond-buying program, which was not big enough to have lasting impact.
Large-scale purchases of short-term government bonds should drive up their price and push down their interest rate, or yield, making it less expensive for countries to borrow money and taking pressure off their finances.
"We will have a fully effective backstop to avoid destructive scenarios," Draghi said at a press conference, in which he also defended the euro currency union as "irreversible."
After the ECB plan was announced, the yields on government bonds across Europe fell and stock markets rallied.
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The Standard & Poor’s 500 index soared 28.68 points to close at 1,432.12. The Dow jumped 244.52 points, to 13,292.
The Nasdaq composite index also reached a milestone, gaining 66.54 points, to 3,135.81. That’s its highest level in 12 years.
European stock markets soared in response to Draghi’s announcement. Germany’s DAX and France’s CAC-40 each rallied 3 percent.
The gains were even larger in Spain and Italy. Spain’s benchmark index soared 5 percent, Italy’s 4 percent.
The interest rates on Spain and Italy’s government bonds sank, a sign investors anticipate a surge in demand for them when the European Central Bank starts its bond purchase program.
Even before Thursday’s surge, the stock rally has been one for the record books.
Last month, Jim Paulsen, chief investment strategist at Wells Fargo Capital Management, published a report showing the more than doubling of stock prices from a recessionary low in March 2009 has surpassed every post-World War II stock rally.
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