NEW YORK World stocks rallied on Thursday, with the Dow and S&P 500 indices hitting all-time closing highs, while the dollar fell after Federal Reserve chief Ben Bernanke signaled the U.S. central bank may not be as close to slowing stimulus as investors had begun to expect.
Copper and gold prices also gained on the idea that continuing stimulus from the Fed and other central banks would support the global economy. Copper prices hit their highest level in nearly a month.
Bernanke said on Wednesday that the overall message from the central bank was that "a highly accommodative policy is needed for the foreseeable future.
Bernanke's message was enough to shift the view of investors, even though minutes from the Fed's June meeting showed that half of its policymakers think the $85 billion-a-month stimulus program should be wound down by the end of the year.
"Having Bernanke come out obviously worked, giving the market some stability," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey. "It's almost as if the markets need to hear this over and over again."
The Fed's stimulus efforts have kept interest rates near zero and helped lift U.S. stocks to record highs this year. Investors worry the U.S. recovery would be hurt if the Fed removes support too soon.
On Wall Street, the Nasdaq closed at its highest since October 2000.
After hitting a record high on May 21, the S&P 500 in June posted its first negative month in eight as Bernanke hinted the Fed could begin winding down its bond buying program this year.
The Dow Jones industrial average .DJI rose 169.26 points, or 1.11 percent, to end at 15,460.92. The Standard & Poor's 500 Index .SPX .INX was up 22.40 points, or 1.36 percent, at 1,675.02. The Nasdaq Composite Index .IXIC was up 57.55 points, or 1.63 percent, at 3,578.30.
MSCI's world index .MIWD00000PUS jumped 1.9 percent, while the pan-European FTSEurofirst 300 .FTEU3 closed up 0.6 percent.
The dollar index .DXY, which tracks the greenback against a basket of six currencies, fell to 82.418, its lowest since June 25 and down 2.8 percent from a three-year high of 84.753 touched on Tuesday. It last traded down 1.5 percent at 82.750.
"The dramatic drop in the dollar highlights how one-sided (dollar bullish) the market had become and how quickly traders raced to close out long dollar positions," said Camilla Sutton, chief foreign exchange strategist at Scotiabank in Toronto.
Volatility in currencies, stocks and bonds in recent weeks has underscored how difficult it will be for the Fed and other central banks to change their stimulus plans without causing a lot of disruption to markets.
Portuguese, Spanish and Italian bonds and Lisbon's stock market .PSI20 bucked the wider global move higher as tensions continued to bubble on the euro zone's debt-strained periphery.
BOND PRICES CLIMB
U.S. government debt prices rose on Bernanke's comments, which reassured the market the U.S. central bank would keep short-term interest rates near zero for an extended period.
Traders said Bernanke's remarks at least indirectly assisted the Treasury's $13 billion 30-year bond auction, reducing nervousness about taking on that much duration amid uncertainty about the near- and medium-term course of monetary policy.
An unexpected rise in U.S. jobless claims in the latest week was another factor behind the bid for Treasuries.
Benchmark 10-year Treasury notes last traded 28/32 higher with a yield of 2.5683 percent.
Copper's benchmark three-month futures contract closed up $175 at $7,000 a tonne on the London Metal Exchange. It peaked at $7,049.25 during the session, a high since June 18. U.S. gold futures for August delivery settled up 2.6 percent at $1,279.90 an ounce, after rallying earlier to a 2-1/2 week high of $1,297.20.
Oil futures were down sharply, however.
Brent crude oil futures declined 78 cents to settle at $107.73 after a monthly IEA oil report damped bullish sentiment.
U.S. crude fell the most in three weeks as investors took profits after three weeks of sharp gains. The price fell $1.61 to settle at $104.91 a barrel after peaking at $107.45 earlier. The Brent/WTI spread widened to end at $2.82 after touching $1.32, the narrowest since late 2010.
(Additional reporting by Rodrigo Campos, Ellen Freilich and Julie Haviv in New York; Editing by Kenneth Barry, Chizu Nomiyama and Dan Grebler)