Friday, February 1, 2013
Dow Jones hits 14,000 for first time since 2007
After rising steadily in early trading thanks to the U.S. jobs report, the Dow briefly crossed 14,000 around 10:07 a.m. EST. The milestone was by a hair -- the highest the Dow reached was 14,000.97 -- and it lasted only a moment. The index was trading around 13,980 shortly afterward. The other major stock indexes were also up.
The Dow has crossed 14,000 only 15 times in its history. The last time was Oct. 17, 2007.
If the gains hold and it closes above 14,000 on Friday, that would put it in even more rarefied territory: On just nine of those days did it manage to close above 14,000 at the end of trading.
That time more than five years ago seems almost a different era -- before signs of the devastating financial crisis were apparent to the average observer.
Lehman Brothers still existed. So did Bear Stearns, Wachovia and Washington Mutual. Housing prices were starting to ebb, but they hadn't cratered. The unemployment rate was 4.7 percent, meaning jobs were abundant.
The benchmark is not far from its all-time high, 14,164.53, which it reached on Oct. 9, 2007. A year later, in the depths of the financial crisis, it had shed nearly 40 percent of its value.
The Dow is an index of 30 big companies, and its purpose is to represent how the broader stock market is faring. And while hitting 14,000 would be an important psychological milestone, it wouldn't be much else.
The stock market is more a representation of how traders are feeling about the economy than the economy's underlying fundamentals. And many investors don't even think the Dow is the best way to track the market: They prefer the much bigger Standard & Poor's benchmark index, which follows 500 companies, because they think it represents a more accurate view of the economy.
"You can hit these milestones, but then it can always end badly," said Joe Gordon, managing partner at Gordon Asset Management in North Carolina. The fact that small investors are finally getting back in the stock market, he said, makes him think that stocks are due for a downturn.
"It's meaningless to the average professional," said Gordon, referring to the 14,000 benchmark. And for workers still unemployed by the financial crisis, he said, "it really means nothing to them."
At midmorning, the Dow was up 119 points to 13,980. The Standard & Poor's 500 rose 10 to 1,508. The Nasdaq composite index was up 19 to 3,161.
Overall, the government jobs report that pushed stocks forward was mixed, but traders chose to focus on the positive. The U.S. said it added 157,000 jobs in January, which was in line with what traders had been expecting. Unemployment inched up to 7.9 percent from 7.8 percent in December. But, encouragingly, the government also reported that hiring over the past two years has been higher than it originally thought.
The jobs number is based on a survey of employers, and the unemployment rate is based on a separate survey of households, which is why they can diverge.
In Europe, tentative and incremental signs of a recovery were enough to push up stocks in France, Britain and Germany. December unemployment in the European Union was lower than analysts had feared, inflation unexpectedly fell, and a survey raised hopes of some growth in the manufacturing sector.
But there were also reminders that the debt problem is far from solved. The Netherlands was also forced to take over one of its major banks, to try to stave off a collapse. In Greece, dock workers extended a strike over the government's spending cuts.
Among companies making big moves:
-- Drugmaker Merck fell nearly 3 percent, down $1.22 to $42.02. Its fourth-quarter profit suffered because of competition from generic medicines against its blockbuster allergy drug Singulair.
-- Insurance company MetLife rose more than 1 percent, up 52 cents to $37.86, after saying it plans to buy the largest private pension fund administrator in Chile.
-- Zoetis, an animal health business that Pfizer just spun off, made its debut on the stock market. It was up 18 percent, rising $4.63 to $30.62.
By Christina Rexrode