NEW YORK (Reuters) - The dollar rose and U.S. surged to record highs on Friday as lingering worries that the Federal Reserve will soon start to scale back its bond-buying program were quelled by assurances the Fed’s policy will remain accommodative.
The volatility that gripped the market earlier this week eased as investors took the view that a likely tapering of the bond program in early next year does not also mean official interest rates will rise soon afterward.
In the lingo of Wall Street, to taper is not to tighten, a revelation that pushed the Dow industrials and benchmark S&P 500 to set both all-time closing and intraday record highs..N
The surge also led the Dow to close out the week with a seventh straight weekly gain, its longest winning streak since an eight-week rally that began in December 2010.
Even after the U.S. central bank starts to scale back its stimulus, monetary policy is likely to be very accommodative for some time, perhaps for years, Atlanta Fed President Dennis Lockhart said on CNBC on Friday.
“The Fed will not start to taper until the economy is able to walk on its own, that’s a positive,” said Phil Orlando, chief equity market strategist at Federated Investors, in New York. “From a catalyst perspective things are calm; we’re sitting just off record highs and in the near term we’re probably fairly valued.”
MSCI’s all-country world equity index .MIWD00000PUS, which tracks shares in 45 countries, rose 0.43 percent.
On Wall Street, the Dow Jones industrial average .DJI closed up 54.78 points, or 0.34 percent, to 16,064.77. The S&P 500 .SPX gained 8.91 points, or 0.5 percent, to 1,804.76, and the Nasdaq Composite .IXIC added 22.495 points, or 0.57 percent, to 3,991.649.
Healthcare stocks led gains, with Biogen (BIIB.O) leading the S&P higher. Biogen shot up 13.1 percent to $285.61 on heavy volume after it won 10 years of exclusivity protection for its multiple sclerosis drug Tecfidera from European regulators.
Gilead Sciences (GILD.O) shares rose 3.7 percent to $74.27 after European regulators recommended approval of its new drug for hepatitis C. It was the third-largest gainer on the S&P.
The S&P 500 healthcare sector .SPXHC has gained 37.5 percent so far in 2013, making it the S&P’s best-performing sector this year.
Comcast Corp (CMCSA.O) was the second largest contributor to the S&P after Bloomberg reported the company and Charter Communications (CHTR.O) have held preliminary talks to discuss a joint bid for No. 2 cable operator Time Warner Cable TWC.N.
Comcast rose 4.4 percent to $49.52, while Charter gained 6.1 percent to $134.66. Time Warner jumped 10.0 percent to $132.92.
Boeing, up 2.3 percent to $135.97, led the Dow higher.
Solid U.S. data this week also eased concern that weaker growth in China and the euro zone may set back the fragile global economic recovery, pointing to a gradually improving outlook for 2014, albeit with less Fed money printing.
Earlier in the global session, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent after shedding 1.4 percent on Thursday. Japan's Nikkei .N225, getting an extra boost from the weaker yen, added 0.1 percent to edge close to its highest level of the year.
European equity markets were largely steady, with the broad FTSEurofirst 300 index .FTEU3 closing 0.1 percent higher at 1,296.92.
A closely watched measure of stock market volatility, the Euro Stoxx 50 Volatility index .V2TX, sank to a near seven-year low.
European trading volumes: link.reuters.com/hax34v
Fed rates and the dollar: link.reuters.com/muc27s
The dollar gained strength against the yen despite signs of a more delayed Fed tapering schedule, reaching a peak of around 101.35 yen for the first time since July. It last traded at 101.32, up 0.17 percent on the day.
The euro climbed to a four-year high against the yen and rose for a second straight day versus the dollar after much-stronger-than-expected German business sentiment pointed to a continued rebound in Europe’s largest economy.
The euro has gained from the swing higher in long-term U.S. Treasury yields, which has expanded the dollar’s rate advantage over the yen. Yields on 10-year Treasuries were at 2.7445 percent, compared with 0.63 percent for Japanese government bonds.
Bund futures settled down 3 ticks at 140.95, though in after-market trading they rose to 141.08 euros.
Comments from Bank of Japan Governor Haruhiko Kuroda that the yen was not abnormally low and that there was no sign of a bubble in shares added to the yen’s weakness.
The greenback fared less well against the euro, which bounced on Thursday when European Central Bank President Mario Draghi shot down a report that the central bank was considering cutting a key interest rate below zero.
Draghi’s comments had lifted the common currency from a one-week low of $1.3399. The euro extended gains against the dollar on Friday on the surprise rise in German business morale in November, rising to around $1.3554.
Among commodities, Brent crude oil settled 97 cents higher at $111.05 a barrel, its highest close in more than a month. <O/R>
The rally has been fed by news of dwindling stocks and refinery glitches in the United States and Europe, as well as signs that an imminent breakthrough in talks over Iran’s nuclear program looks less likely.
U.S. oil ended the session off 60 cents to settle at $94.84 a barrel.
Additional reporting by Richard Hubbard in London; Editing by Dan Grebler and Leslie Adler