Market Recap: Despite Credit Downgrade, Stocks Manage to Close Up

Markets closed up today:

▲ Dow: +0.40 percent

▲ Nasdaq: +0.89 percent

▲ S&P: +0.40 percent

Precious metals:

▲ Gold: +0.29 percent to $1,767.90 an ounce

▼ Silver: -0.04 percent to settle at $34.57

Commodities:

▲ Oil: +0.90 percent

Markets were up because:

The stock market closed up Friday still coasting on the boost from yesterday’s third round of quantitative easing but lagging because of the reaction to Egan-Jones’ credit downgrading.

The Dow Jones industrial average hit its highest close since the pre-crisis days of November 2007. The Russell 2000 index of smaller companies briefly traded above its all-time closing high.

Markets rallied around the world in places where traders were getting their first chance to react to the Fed announcement: Stocks climbed more than 2 percent in India and France and almost 2 percent in Japan and Germany.

Apple, the most valuable company in American history, blew through its own all-time high and neared $700 per share as it started taking orders for the iPhone 5.

The gains came on top of a 206-point climb for the Dow on Thursday, when the Fed laid out additional plans to try to energize the economy, including buying $40 billion a month in mortgage bonds for as long as necessary.

But a day later, even with the market rising, plenty of investors were unconvinced. They bought stock, but they also worried that the Fed can't do much to fix the economy and predicted that the stock market gains would be short-lived.

The Dow rose as much as 113 points Friday before pulling back. It ended up 53.51 points to 13,593.37. It is a 4 percent rally away from its all-time high of 14,164, reached Oct. 9, 2007.

The Standard & Poor's 500 rose 5.78 to 1,465.77, almost exactly 1,000 points below its all-time high. The Nasdaq composite index, which has been trading at the highest levels since 2000, climbed 28.12 to 3,183.95.

In the steps it laid out Thursday, the Fed extended its pledge of super-low short-term interest rates into 2015, from its previous target of 2014. Its plan to buy mortgage bonds is part of a strategy known as quantitative easing, designed to get people and businesses to borrow and spend, and to raise stock prices.

Data out Friday also underscored the tenuous state of the economy. U.S. industrial production fell in August by the largest amount in more than three years, the Fed reported.

Also, high gas prices drove up consumer prices in August by the most in three years, the Labor Department said. The national average for a gallon of gas is around $3.87, a hardship for many families.

Oh, yeah, and the U.S.'s credit rating was also downgraded. That definitely stymied some of yesterday's market euphoria.

The Associated Press contributed.