The Dow Jones industrial average has reclaimed 10,000 for the first time in a year.
The Dow crossed five figures in trading Wednesday, seven months after it hit a 12-year low of 6,547.05 on March 9. The comeback by the stock market’s best-known indicator is the most visible sign yet that investors believe the economy is indeed recovering from the financial crisis and recession.
Cheering erupted from traders on the floor of the New York Stock Exchange as stocks briefly moved above the psychological barrier. The Dow at times fell back below 10,000 in the normal ebb and flow of trading, but finished at 10,015.86, up 144.80 points.
“People feel more comfortable and feel like there’s less risk in the market when you get above a psychological point like 10,000,” said Carl Beck, a partner at Harris Financial Group.
Upbeat earnings reports from chip maker Intel Corp. and banker JPMorgan Chase & Co. Wednesday gave the Dow its final push past 10,000.
Investors are increasingly shaking off lingering doubts about the economy. However, analysts still warn that problems like rising unemployment and a weak housing market pose a threat to a solid recovery.
This combined with other recent economic reports confirms that the recession
is likely over and our economy is starting to recover. However, we may see a
spike to 10% unemployment before a major drop because the jobs data
traditionally trails other economic indicators. The last time we had a 10%
or higher national unemployment rate was June, 1983 when it the rate was
The Dow is now up more than 50 percent from its March low. But it remains nearly 30 percent below its peak of 14,164.53 hit in October 2007.
The index first finished above 10,000 on March 29, 1999, in the midst of a powerful rally that ended with the dot-com bust at the start of this decade. Stocks then fell below that mark last October as investors sold stocks in a feverish panic following the downfall of Lehman Brothers.
The latest round of earnings reports, which will continue to pour in over the next few weeks, are the key to keeping the market’s rally alive, analysts say. If earnings fall short of expectations, stocks could stumble.
Together, the reports quieted fears that major U.S. companies won’t be able to boost profits through sales growth and not just massive cost-cutting, which was a main driver behind the improvement in second-quarter results.
Investors displayed little reaction to minutes from the Federal Reserve’s last meeting that indicated policymakers were conflicted over whether to expand or trim a program intended to drive down mortgage rates and support the housing market.
Fed Chairman Ben Bernanke and his colleagues agreed to slow down the pace of a $1.25 trillion program to buy mortgage securities from Fannie Mae and Freddie Mac. Instead of wrapping up the purchases by year-end, the Fed last month said it would do so by the end of March.
Source: Associated Press