The Dow flirts with 12,000
Published 9:00 pm Wednesday, October 18, 2006
NEW YORK – A wave of enthusiasm just after Wall Street’s opening bell Wednesday carried the Dow Jones industrial average past 12,000 for the first time, and then a ripple of caution pulled the stock market’s best-known barometer back below that milestone.
Nearly 71/2 years after it first reached 11,000, the Dow rose as high as 12,049.51 before retreating, although it did manage its eighth closing record high in two weeks. But that bit of backsliding doesn’t mean trouble on Wall Street. The fact that the markets didn’t barrel higher showed how much saner investors are compared with the spring of 1999, when a Dow inflated by tech-boom fever needed just 24 days to go from 10,000 to 11,000.
Indeed, some analysts counsel against reading too much into the run-up in the blue chip average, which comprises only 30 stocks. The Dow’s breadth is dwarfed by the Standard &Poor’s 500, the index most professional investors use as a benchmark. The S&P 500 has shown strong gains in recent months, although it hasn’t kept pace with the Dow.
Al Goldman, chief market strategist at A.G. Edwards, was among those who were less than impressed with the Dow’s milestone: “12,000 is much ado about nothing.”
The Dow, whose stocks include International Business Machines Corp., Microsoft Corp. and Wal-Mart Stores Inc., has risen 312 points this month as oil prices retreated below $60 a barrel and it appeared the economy was headed for a soft landing after more than two years of interest rate increases.
Alan Gayle, a senior investment strategist at Trusco Capital Management, sees 12,000 as a sign investors are growing more confident.
“That suggests that a lot of pessimism about stocks is dissipating. There is a fundamental positive message in this technical development,” he said.
The Dow’s journey from 11,000 was marked by the dot-com bust, recession and the aftermath of the 2001 terror attacks. Its final push past 12,000 Wednesday came after a Labor Department report indicated consumer price pressures are leveling off and third-quarter earnings reports from IBM and other companies bolstered investors’ confidence.
Earnings and inflation have been the market’s biggest worries of late. The good news had investors celebrating at the Dow’s opening.
The Dow closed up 42.66, or 0.36 percent, at 11,992.68. Its previous closing high of 11,980.60 was set Monday.
Broader stock indicators were mixed. The Standard &Poor’s 500 index was up 1.91, or 0.14 percent, at 1,365.96, and the Nasdaq composite index fell 7.80, or 0.33 percent, to 2,337.15.
Bonds rose, with the yield on the benchmark 10-year Treasury falling to 4.76 percent from 4.77 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude settled down $1.28 at $57.65 a barrel on the New York Mercantile Exchange amid growing concern before an OPEC meeting Thursday; doubts have swirled over whether OPEC’s members can agree on an immediate production cut.
Investors’ relief over oil’s decline from a high of $78.40 has given Wall Street an unusually strong October and powered the Dow higher; some of the market’s worst days, including the 1929 and 1987 crashes, have been in October. And it was on Oct. 9, 2002, in the depths of the bear market, that the major indexes fell to their lowest levels in five and six years – the Dow closed that day at 7,286.27.
