Wall Street shares extended their rally for a second day as Australia’s decision to raise interest rates boosted confidence that a global economic recovery is taking root.


The blue chip Dow Jones Industrial Average lifted 131.50 points (1.37 per cent) to 9,731.25, a day after jumping also by more than 100 points.

The technology-heavy Nasdaq composite added 35.42 points (1.71 per cent) to 2,103.57 while the Standard & Poor’s 500 index increased 14.26 points (1.37 per cent) to 1,054.72.

The market opened on a bullish note after Australia became the first advanced economy to raise interest rates since the financial crisis.

The central bank announced a rise of 25 basis points to 3.25 per cent, lifting rates off a 49-year low.

Although the United States is unlikely to raise rates in the near future as it still undergoes the painful transition of emerging from recession, investors saw the move as a key indication of global recovery.

“It is clear that there is a psychological bid in the market as the symbolism of the first rate hike from a G20 nation is trumping any negative considerations that go hand-in-hand with higher rates,” said Patrick O’Hare of Briefing.com.

“That symbolism shines through in the fact that most equity markets around the globe have gained at least 1.0 per cent in the wake of the rate hike announcement,” he said.

The rate hike is being interpreted as “another confirmation that the world is back from the brink of economic disaster,” O’Hare said.

Analysts at Charles Schwab & Co said the market also notched gains from a weakening dollar which lifted energy and commodity prices.

“Stocks were solidly higher, boosted by strong gains in energy and materials issues as commodity prices soared amid concerns over the dollar,” they said in a note to clients.

The Independent daily in Britain claimed in a report Tuesday that several Arab countries were in talks to discontinue the practice of pricing their oil exports in dollars, which many of the countries later denied but nevertheless led to broad-based pressure on the US currency.

Economic recovery has prodded investors to pump their investments into riskier assets such as stocks and move away from the safe-haven dollar.

Among gainers were commodity-linked stocks. Chevron was up 1.69 per cent to 70.56 dollars, ExxonMobil 1.60 per cent to 68.66 dollars and Barrick Gold 5.23 per cent to 38.84 dollars.

Aluminium producer Alcoa, which will kick off the third quarter corporate earnings reporting on Wednesday, rose 3.50 per cent to 13.89 dollars. Industrial equipment maker Emerson Electric rose 1.40 per cent to 38.84 dollars following its move to take over information technology company Avocent, which jumped 20.96 per cent to 24.82 dollars.

Chemical giant Dupont added 1.69 per cent to 31.89 dollars and General Electric climbed 1.58 per cent to 16.08 dollars. The bond market fell.

The yield on the 10-year Treasury bond rose to 3.248 per cent from 3.224 per cent Monday and that on the 30-year bond increased to 4.058 per cent from 4.023 per cent.

Bond yields and prices move in opposite directions.