(NEW YORK) — The Dow Jones Industrial Average and S&P 500 closed at a four-year high on Thursday after the European Central Bank announced a plan that may provide some long-term assistance to struggling European markets.
The S&P 500 closed up two percent to 1,432, its highest since January 2008. The Dow Jones Industrials reached their highest point since December 2007, to 13,292, up almost two percent.
Earlier Thursday, the president of the European Central Bank, Mario Draghi, announced the bank would allow unlimited purchases of government bonds. The policy is a bold attempt to cut the interest rates of distressed nations, and put an end to speculation of a euro currency breakup.
As the plan was announced, yields of Spanish and Italian debt stayed lower than they were last month.
But Guy LeBas, chief fixed income strategist for Janney Capital Markets, said in a note to investors that the announcement “fell far short of its potential to support the Eurozone.”
He said the plan reinforced his perception that the European Central Bank tries to make “the least effort possible and hope it works” in the “European sovereign credit saga.”
Draghi said the program, called Outright Monetary Transactions, “will enable us to address severe distortions in government bond markets.” He told journalists the new measures are a “fully effective backstop” against volatility.
The run-up in interest rates, he says, have been caused by “unfounded fears on the part of investors of the reversibility of the euro.”
The new stock market highs happened to come on the day President Obama was to accept the Democratic nomination for a second term. He has said his work in bringing the U.S. back from the economic crisis of 2008 is not finished.
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