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Dow, S&P 500 close at record highs

Adam Shell
USA TODAY

Two benchmark stock indexes closed at record highs Friday, on the last trading day of a month that was a roller coaster ride for investors.

Driving the rally: Huge and surprising moves by Japan to add more stimulus to its ailing economy. Japan's Nikkei 225 took a super-sized 4.8% leap, starting a global stocks rally that ended on Wall Street with strong market gains.

Traders work on the floor of the New York Stock Exchange, Friday, Oct. 31, 2014.

The Dow Jones industrial average ended up 195.10 points, 1.1%, to 17,390.52 -- its highest close since Aug. 19, when it finished at 17,279.74. The Standard & Poor's 500 added 23.40 points, 1.2%, to close at 2018.05 -- its highest close since Aug. 18, when it finished at 2011.36. And the Nasdaq composite index ended at a 14 1/2-year high, gaining 64.60 points, 1.4%, to close at 4630.74.

The tech-packed Nasdaq climbed as high as 4641.51 in early trading -- its highest level in more than 14 years -- before retreating a tad. At its peak, the Nasdaq was at its highest level since March 29, 2000.

The yield on the benchmark 10-year U.S. Treasury note ended 2.33%, up from 2.31% Thursday. And the price of crude oil keeps falling. On Friday, it lost another 54 cents to end at $80.58 a barrel.

Japan markets were catapulted higher on a double dose of good news.

The country's central bank announced it will boost asset purchases in an effort to jump-start its lagging economy and try to boost inflation, which is dangerously low. Also, Japan's Government Pension Investment Fund (GPIF) surprised markets by announcing a major shift in where it will invest its assets, which total nearly 127 trillion yen -- about $1.1 trillion -- according to Citibank. The GPIF said it was making a major shift in its investment strategy and plans to substantially boost its investments in higher-risk assets, such as stocks.

In what amounts to a massive easing in monetary policy by Japan in its fight to stave off deflation, the Japanese central bank upped the amount of money it is pumping into the system. The announcement, which caught investors by surprise, also included new and more aggressive asset purchases.

The Bank of Japan said it would boost its purchases of domestic government bonds, buy more long-term bonds, as well as exchange traded funds that track Japan's benchmark stock index and real estate investment trusts.

"The Bank of Japan surprised markets," Barclays told clients in a report.

The floor of the New York Stock Exchange.

The GPIF announced that it plans to double its investments in both Japanese stocks and foreign stocks, boosting the share of the fund's investment pie for each asset class to 25% from 12%. At the same time, it slashed its target for domestic Japanese bonds to 35% from 60%.

The move by the GPIF is bullish for stocks as it provides additional buying power for stocks globally, analysts say.

The Nikkei ended up gaining a whopping 755.56 points. In Hong Kong, the Hang Seng index rose 1.3%. The Shanghai composite gained 1.2%.

European benchmarks also ended higher Friday, with France's CAC 40 adding 2.2%, Germany's DAX 30 index up 2.1% and Britain's FTSE 100 up 1%.

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