Dow’s Rise Brings It Close to 10,000 Mark
The Dow Jones industrial average came a step closer to recrossing the 10,000 mark Monday, managing a solid rally as reports of U.S. military victories in Afghanistan increased hopes that the worst is over for the market.
The widely watched Dow has now risen more than 20% from its Sept. 21 low, meeting the technical definition of a bull market, but many analysts doubt the momentum will last. They note that most of the gains represent a rebound from the sell-off that followed the Sept. 11 terror attacks, rather than buying on concrete indications that the U.S. economy is turning around.
“The market’s got a positive tone here, but it’s not really running on rocket fuel,” said Jon Brorson, director of equities at Northern Trust. “I wouldn’t be surprised if the market falls back from here.”
The Dow closed up 109.47 points, or 1.1%, at 9,976.46--just 23.54 points below the 10,000 level it last held Sept. 5. The Dow is up 21.1% since Sept. 21, when it capped the market’s worst week since the 1930s by closing at a three-year low of 8,235.81.
The Standard & Poor’s 500 index rose 12.41 points, or 1.1%, to 1,151.06, its best finish since Aug.28, when the index stood at 1,161.51.
The S&P; 500, a broader market gauge than the Dow and the choice of most pros for measuring performance, has climbed 19.2% since Sept. 21.
Wall Street typically considers a bull market to be a 20% gain by major market indexes from their most recent low points.
Likewise, a bear market is a 20% drop from a recent high. By that measure, the S&P; 500 has been in a bear market since March, although the Dow didn’t slip into bear territory until the post-Sept. 11 sell-off.
The Nasdaq composite index advanced 35.84 points, or 1.9%, to 1,934.42, within striking distance of the 2,000 milestone not seen since Aug. 7.
Nasdaq, which has been in a bear market since April 2000, is up 36% since Sept. 21.
Stocks have been advancing gradually as the market recovered from the sell-off that followed the attacks, helped along by continued Federal Reserve interest rate cuts.
News in the last week that the Taliban government was retreating in Afghanistan has cheered investors and professional money managers, who had been keeping large amounts of cash on the sidelines for fear that the uncertainty would cause stocks to fall again.
Wall Street is also happy about falling energy prices. Cheaper fuel bills mean consumers, whose spending accounts for two-thirds of the economy, have more money to spend on other goods and services.
Despite the market’s rise, analysts say investors are well aware the economy remains weak. Third-quarter earnings reports were dismal, and few companies have offered any indications that their business is improving.
The Commerce Department reported Monday that housing construction in October declined by 1.3% from September--a sign that sagging consumer confidence and the weak economy have builders playing it safe.
“I think it’s too early to tell whether the economy is really improving. I think we may be a little ahead of ourselves here,” said Bill Barker, investment strategy consultant at RBC Dain Rauscher. “You’re beginning to get a little more confidence from some companies, but the optimism is not widespread.”
Advancing issues led decliners 3 to 2 on the New York Stock Exchange. Trading was moderate ahead of the Thanksgiving holiday. The stock market will be closed Thursday and open for only half a day Friday.
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In other market highlights:
* Treasury bond yields fell for the first time in seven trading sessions as investors looked for bargains among the battered securities. The yield on the benchmark 10-year T-note fell to 4.80% from 4.85% Friday.
* Financial stocks, thought to be an early leader in a market turnaround, were higher. American Express rose $1.07 to $34.20 and Citigroup climbed 80 cents to $49.60. Both are Dow members.
* Alcoa, another Dow member, gained $1.37 to $38.49 after announcing 6,500 job cuts and a plant closure to improve efficiency.
* Home-improvement retailer Lowe’s rose $2.75 to $43.10 after reporting a 24% earnings increase.
* Xerox rose 72 cents to $7.30 and was the NYSE’s most-active issue. The struggling copier maker signed an $800-million agreement with General Electric’s GE capital to provide financing for Xerox customers in Canada and Europe.
