NEW YORK – Stocks extended their winning streak Monday after China said it would allow its currency to appreciate against the dollar, a move that could provide a boost for U.S. manufacturers and exporters.
The Dow Jones industrial average rose for a fifth day, adding 120 points in morning trading. Broader indexes also climbed.
China keeps its currency, the yuan, artificially low to bolster exports. At the same time, the weak currency makes imported goods expensive for consumers. A stronger yuan compared with the dollar should allow U.S. manufacturers and exporters to be more competitive selling their products in China, one of the world’s largest and fastest-growing economies.
The stronger yuan also should reduce the threat of inflation in China, meaning the government won’t likely have to raise interest rates soon. Traders have been concerned that China would take steps to restrain rapid growth in the country. A slowdown there could crimp demand worldwide.
At the start of the year, China tried to slow the pace of growth by forcing banks to hold larger reserves. The moves were aimed at avoiding speculative bubbles in areas like real estate.
The focus on China comes on a quiet day for domestic news. The Federal Reserve begins a two-day meeting Tuesday where it is expected to keep benchmark interest rates at historic lows. That could keep a lid on any spike in interest rates, which often climb to match the higher rates set by the Fed.
Canadian drug maker Biovail Corp. and Valeant Pharmaceuticals International agreed to a combination. Biovail rose 13.1 percent, while Valeant climbed 2.3 percent.
In midmorning trading, the Dow rose 119.26, or 1.1 percent, to 10,570.51. The Dow has risen 5.2 percent in the past two weeks, its biggest two-week gain since mid-November 2009.
The Standard & Poor’s 500 index rose 11.47, or 1 percent, to 1,128.98, and the Nasdaq composite index rose 24.19, or 1.1 percent, to 2,333.99.
With investors pouring money into stocks and other risky assets like commodities, bond prices fell sharply and pushed interest rates higher. The yield on the 10-year Treasury note rose to 3.30 percent from 3.23 percent late Friday. The 10-year note is often used as a benchmark for consume loans and mortgages.
Crude oil rose $1.45 to $78.63 per barrel on the New York Mercantile Exchange.
Gold hit a record high early in the day. It climbed as high as $1,266.50 an ounce before pulling back to $1,257.00 an ounce.
Biovail rose $1.91, or 13.1 percent, to $16.51, while Valeant rose $1.06, or 2.3 percent, to $46.93. Valeant shareholders will receive cash and Biovail stock in the deal, though the new company will take the Valeant name.
Six stocks rose for every one that fell on the New York Stock Exchange, where volume came to 164 million shares, compared with 590 million shares traded at the same point Friday.
The Russell 2000 index of smaller companies rose 9.51, or 1.4 percent, to 676.43.
Overseas markets jumped following China’s announcement. Britain’s FTSE 100 rose 0.9 percent, Germany’s DAX index gained 1.2 percent, and France’s CAC-40 climbed 1.4 percent. Japan’s Nikkei stock average surged 2.4 percent, while Hong Kong’s Hang Seng jumped 3.1.
