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U.S. stocks hit record high on solid data; Dow gains 0.89%

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Shutterstock photo - U.S. stock prices hit record highs on Tuesday after solid service-sector data coupled with sentiments that the Federal Reserve will keep monetary stimulus programs in place while the economy makes fundamental improvements sparked a risk-on rally.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.89% at 14,254, the S&P 500 index ended up 0.96%, while the Nasdaq Composite index gained 1.32%.

The Dow Jones Industrial Average last hit an all-time high in October of 2007.

In the U.S. earlier, the Institute for Supply Management said its February non-manufacturing index rose to 56.0 from 55.2 in January, beating analysts' calls for the index to fall to 55.0 last month.

The news sparked a rally in U.S. stock markets, which morphed into a full-blown risk-on trading session fueled by sentiment that the Federal Reserve will continue stimulating the economy in the near future even as recovery picks up its pace.

The Fed is currently buying USD85 billion a month in Treasury holdings and mortgage debt held by banks with the aim of flooding the financial system with liquidity to spur recovery and encourage investing and hiring.

Side effects to such loose monetary policies include a weaker dollar and rising stock and commodities prices.

Expectations that central banks around the world will continue stimulating their respective economies also fueled the buying spree.

Leading Dow Jones Industrial Average performers included Cisco, up 2.27%, United Technologies, up 2.11%, and Boeing, up 2.02%.

The Dow Jones Industrial Average's worst performers included Coca-Cola, down 0.33%, Merck, down 0.16%, and Alcoa, which was up 0.12%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 2.41%, France's CAC 40 rose 2.09%, while Germany's DAX 30 finished up 2.32%. Meanwhile, in the U.K. the FTSE 100 finished up 1.36%.

On Wednesday, the U.S. is to publish data on ADP nonfarm payrolls, a precursor to official data on nonfarm payrolls to be released on Friday. The U.S. is also to release official data on factory orders and crude oil stockpiles.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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