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US stocks return to late '07 level in market milestone

NEW YORK -- The last time the stock market was this high, the Great Recession had just started, and stocks were pointed toward a headlong descent.

But on Thursday, the Dow Jones Industrial Average hit its highest mark since December 2007, and the Standard & Poor's 500 index soared to its highest level since January 2008 in a rally that seemed destined to mark a milestone: American stocks have come almost all the way back.

A long-anticipated plan to support struggling countries in the European Union provided the necessary jolt, and the gains were extraordinarily broad. All but 13 stocks in the S&P index were up. European markets surged, too.

“There's just a sea of green,” said JJ Kinahan, TD Ameritrade's chief derivatives strategist. “It's pretty fun.”

At the start of 2008, the U.S. economy was already a month into recession, though most people scarcely knew it at the time. The S&P had recently hit an all-time high, and the unemployment rate was 5 percent, compared with the current 8.3 percent.

Then, in March 2008, the investment bank Bear Stearns collapsed under the weight of bad mortgage bets, and investors began to sell. In September, the full financial crisis took hold as Lehman Brothers filed for bankruptcy, banks stopped lending to each other and investors began dumping stocks in earnest.

By March 2009, the S&P had dropped 57 percent from its high to hit a 12-year low of 676.

Since then, the index has been on an impressive if often bumpy climb. Helping to power it was unprecedented support from the Federal Reserve, which critics say has reignited a dangerous gambling spirit among professional investors, and record profits at big U.S. companies.

Thursday's rally got momentum after the president of the European Central Bank unveiled a new program to buy government bonds from the region's struggling countries with the aim of lowering their borrowing costs. Mario Draghi said the program will have no set limit on how much it can buy.

That was just what investors needed to hear. The S&P 500 index jumped 28.68 points to 1,432.12. The Dow Jones Industrial Average surged 244.52 points to 13,292.

The Nasdaq composite index also reach a milestone, gaining 66.54 points to close at 3,135.81, its highest level in 12 years.

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