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Saturday, September 15, 2012

US Stocks end week at multi-year highs (ext.CNN)

NEW YORK (CNNMoney) -- Investors were on a Fed-induced high this week, pushing stocks to their best levels in several years.

Stocks rallied Friday, albeit more modestly than the surge immediately after the Federal Reserve announced a third round of quantitative easing, or QE3, on Thursday afternoon.

The Dow Jones industrial average, S&P 500, and Nasdaq all posted gains between 1.5% and 2.3% for the week. The Dow and S&P 500 are at their highest point since the end of 2007 while the Nasdaq hasn't been at this level since late 2000. All three indexes moved up between 0.4% and 0.9% Friday.

The Fed said Thursday it would buy $40 billion of mortgage-backed bonds each month for however long it deemed necessary. With no end-date in sight for monetary loosening, investors viewed the Fed's moves as the best possible stimulus for the markets.

"The Fed gave us even more than we expected and so much money has been sitting on the sidelines that people are starting to chase performance," said Douglas DePietro, managing director for sales trading at Evercore Partners. "There's some really good support to this rally."

After the Fed announcement, trading volume, which has lackluster overall this year, picked up dramatically, according to several traders.

The optimism carried over to the commodities market Friday, pushing oil prices up 0.7% to $99 a barrel.

Gold, which is used as a hedge against inflation, also continued to climb, with prices touching a seven-month high before easing to $1,772.70 an ounce. Meanwhile, U.S. Treasuries sold off sharply, pushing the 10-year yield to 1.87% from 1.74% late Thursday.

In yet another sign of investor exuberance, or perhaps even complacency, CNNMoney's Fear & Greed Index hit an all-time high of 94, showing that investors are in 'Extreme Greed' mode.

The Federal Reserve's data on industrial production for August showed a steeper-than-expected drop of 1.2%, while the preliminary edition of the University of Michigan's Consumer Sentiment Index for September came in higher than expected. Data on July business inventories from the Census Bureau also exceeded forecasts. 

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