WORLD / America
The Dow closes over 13,000
(AP)
Updated: 2007-04-26 05:54
NEW YORK - It looks like cause for celebration: The Dow Jones industrial
average surged from 12,000 to 13,000 in just six months. But appearances
can be deceiving, and there may be more reason to worry than rejoice
about Wall Street's latest accomplishment.
The monitor above the floor of the New York Stock Exchange shows the Dow
Jones Industrial Average above 13,000, Wednesday, April 25, 2007 in New
York. [AP]
Stronger-than-expected profits from several large companies helped push
the stock market to historical heights. But many big corporations,
including the Dow components, made a chunk of that money overseas, where
economies are growing faster than in the United States. And many of the
same worries that weighed on investors earlier in the year remain: rising
energy costs, a slumping housing market and a possible credit crunch.
Still, the stock market's best-known indicator swept past its latest
milestone shortly after trading began Wednesday, and even made it past
13,100, rising as high as 13,107.45. The Dow, which has risen in 18 of
the past 20 sessions and gained more than 780 points in that time, closed
at 13,089.89, up 135.95, or 1.05 percent. It was the Dow's 35th record
close since the start of October.
The broader market shared in the rally. The Standard & Poor's 500 index
rose 15.01, or 1.01 percent, to 1,495.42, after reaching 1,496.59, a
six-and-a-half-year high. The technology-dominated Nasdaq composite index
advanced 23.35, or 0.92 percent, to 2,547.89, after hitting a six-year
high of 2,551.39.
And the Russell 2000 index, which reflects the performance of smaller
companies, inched past a record close set earlier this month, rising
5.71, or 0.69 percent, to 832.07.
It took the Dow just 129 trading days, since Oct. 18, to make the trek
from 12,000 to 13,000, far less than the 7 1/2 years the blue chips took
to go from 11,000 to 12,000. The swiftness of this latest trip does
recall the days of the dot-com boom when the major indexes were soaring
and it took the Dow a mere 24 days to barrel from 10,000 to 11,000.
The Dow climbed to a record this time as many of the country's biggest
companies surpassed analysts' first-quarter earnings projections. Among
those beating forecasts and advancing Wednesday: soft-drink maker PepsiCo
Inc., materials manufacturer Corning Inc. and Dow component Boeing Co.
Wall Street got an additional lift from the Commerce Department's report
of an increase in durable goods orders, which reassured investors that
demand for U.S. products remains strong. The department also reported
that sales of new homes rebounded slightly in March.
About two-thirds of U.S. companies so far have reported earnings that
were in line with or higher than analyst expectations, said Jim Herrick,
director of equity trading at Baird & Co.
"We've had pockets of companies report better earnings, and in light of
the Fed not appearing to raise rates anytime soon, that bodes well for
the market," said Herrick, referring to the Federal Reserve. "Going
forward, the market's going to be data-driven. The market's going to
focus on economic data to get a hint about what the Fed will do in the
latter half of the year."
Wednesday's advance gained even more momentum from the Fed's assessment
that economic growth seemed moderate in much of the country. Inflation
appeared tame, according to the Fed's Beige Book, which describes
economic conditions in regions around the country and arrives two weeks
before the central bank's next meeting.
Investors have been encouraged by stable earnings growth, which shows
U.S. companies are faring well despite a slow economy. A large reason why
corporate growth has held up is strength in international sales; PepsiCo
Inc., for one, said Wednesday its overall profit rose 16 percent, despite
a drop in operating profit at its North America unit.
Also giving exporters an advantage, the dollar is trading near historical
lows versus the euro. The 13-nation currency rose as high as $1.3664
Wednesday.
"International sales are a huge part of S&P 500 revenues, and this lower
dollar makes these companies more competitive," said Scott Wren, equity
strategist for A.G. Edwards & Sons. He said analysts estimate 30 percent
to 40 percent of sales at S&P 500 companies come from outside the United
States.
The biggest gainer among the 30 Dow industrials was Alcoa Inc. The
aluminum producer said Wednesday it is considering selling its packaging
and consumer businesses, which account for about 10 percent of annual
revenue. Alcoa rose $1.81, or 5.3 percent, to $35.76.
3M Corp., the sole decliner in the Dow, slipped 3 cents to $76.97 ahead
of its earnings report Thursday.
The technology-dominated Nasdaq was lifted by Amazon.com, which reported
late Tuesday that its first-quarter profit more than doubled, besting
analyst estimates. The Web retailer also boosted its revenue forecast for
the year, reassuring investors that technology companies have the
potential to keep posting profits. Amazon rose $12.06, or 27 percent, to
$56.81.
The nearly 111-year-old Dow was the first of the major indexes to recover
from the stock market's prolonged slump in the early part of the decade.
The S&P 500 has yet to reach its closing peak of 1,527.46, set in March
2000, and no one expects the Nasdaq to equal its record of 5,048.62, also
reached in March 2000, anytime soon.
Wednesday's run-up helped buoy the major indexes gains for the year,
sending the Dow, S&P and Nasdaq each up about 5 percent.
The Dow's latest achievement did not come without setbacks and volatility
�� the index lost 416 points in a single session on Feb. 27 amid fears
that the U.S. economy would fall into recession and that China's economy
would slow as well. Wall Street has since had periodic shudders over
signs that inflation might be getting out of hand �� a trend that would
lead the Fed to resume interest rate hikes �� and over data showing
weakness in the housing market.
Just two weeks ago, the Dow fell nearly 90 points after minutes from the
last Fed meeting showed the central bank's level of concern about
inflation.
Inflation could re-emerge as an obstacle to the stock market's uptrend if
energy costs keep surging. On Wednesday, crude oil futures settled up
$1.26 to $65.64 per barrel and gasoline futures rose to 8 1/2 month highs
on the New York Mercantile Exchange, after the Energy Department reported
a decline in U.S. gasoline inventories.
Bonds fell after the positive economic data and amid the advance in
stocks. The yield on the benchmark 10-year Treasury note rose to 4.65
percent from 4.62 percent late Tuesday.
Gold prices rose.
Advancing issues outnumbered decliners by more than 2 to 1 on the New
York Stock Exchange, where consolidated volume came to 3.17 billion
shares, just ahead of Tuesday's 3.11 billion shares.
Overseas, Japan's Nikkei stock average fell 1.24 percent. Britain's FTSE
100 closed up 0.50 percent, Germany's DAX index gained 1.00 percent, and
France's CAC-40 added 1.04 percent.
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