Dow closes at 13,540, highest since '07

The Federal Reserve says it will spend $40 billion a month to purchase mortgaged-back securities because the economy is too weak to reduce high unemployment. AP video (Sept. 13)

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The stock market staged a huge rally Thursday after investors got the aggressive economic help they wanted from the Federal Reserve.

The Dow Jones industrial average spiked more than 200 points and cleared 13,500 for the first time since the beginning of the Great Recession. The average is within 625 points of its all-time high.

The Fed said it would buy $40 billion of mortgage securities a month until the economy improves. It left open the possibilities of buying other assets and of buying long after the recovery picks up.

The central bank also extended its pledge of super-low short-term interest rates into 2015, and extended a program to drive down long-term rates.

The Dow closed up 206.51 points, the seventh-biggest gain this year, at 13,539.86, its highest close since the last days of December 2007, the first month of the recession.

The broader Standard & Poor's 500 index was up 1.63 percent at 1,459.99, also its highest since December 2007. The Nasdaq composite index, which has been trading at its highest levels since 2000, was up 1.33 percent at 3,155.83.

David Abuaf, chief investment officer at Hefty Wealth Partners, said he expects investors to keep shifting from safer assets like government bonds to stocks. That could push stock prices higher and start a cycle of increased wealth and spending.

But some economists have warned that the bond-buying could have a limited impact because interest rates are already near record lows. -- AP

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