Dow Touches Record but Falls Short at Close

The Dow Jones industrial average briefly traded at a record high Thursday before falling back near the end of the session -- forcing anxious bulls to wait at least another day for a new milestone.

The blue-chip Dow rose as high as 11,728.46 with a few minutes left in the session, surpassing the old closing peak of 11,722.98 reached Jan. 14, 2000.

But the 30-stock index dropped back by the final bell, finishing up 29.21 points, or 0.2%, to 11,718.45.

“Everybody wants this market to go higher, especially after it touched the record high,” said Subodh Kumar, investment strategist at CIBC World Markets.

Analysts, noted, however, that the Dow often balks as it approaches milestone numbers. The index struggled for three weeks to surpass the 10,000 mark for the first time in March 1999.

The broader market also was mostly higher Thursday. The Standard & Poor’s 500 inched up 2.56 points, or 0.2%, to 1,339.15, its highest since Feb. 7, 2001, but well below its record close of 1,527.46 set March 24, 2000.

The Nasdaq composite added 6.63 points, or 0.3%, to 2,270.02, a four-month high. The tech-heavy Nasdaq is more than 55% below its all-time high of 5,048.62 reached March 10, 2000, at the zenith of the technology mania.

U.S. blue-chip stocks have come alive in recent months, in part boosted by investors’ search for relative safety after the global market sell-off from mid-May to mid-June.

Since June 30, Pfizer has risen 20.6%, McDonald’s is up 17.8% and Procter & Gamble has gained 12%. All are Dow member stocks.

By contrast, the Russell 2,000 index of small-company stocks is up 1.1% in the period.

The Dow lagged many broader market indexes over the last three years as investors favored stocks of smaller companies and issues tied to the real estate and commodity markets.

The U.S. market overall has risen since June, buoyed by falling energy prices and by the Federal Reserve’s decision to pause in its credit-tightening campaign.

But investors have become wary of stocks of companies whose fortunes are closely tied to the economy’s swings, as U.S. growth has slowed. There also is a sense that the booms in residential real estate and commodities are over.

Those sentiment shifts have brought some investors back to classic blue-chip growth stocks that are heavily represented in the Dow.

On Thursday the market opened with a rally, then faded modestly after the government reported a downward revision to second-quarter economic growth.

Still, “There are no signs of a dramatic economic slowdown,” said Sander Gerber, chairman of XTF Advisors, which has over $100 million in assets. “We appear to be in a sustained slow-growth environment,” which should be good for equities, he said.

That view will be tested in coming weeks as third-quarter earnings reports roll out. Many analysts expect another quarter of double-digit profit gains for blue-chip companies.

The Dow’s push toward a new high is being helped this week by portfolio “window dressing,” analysts said. Investment managers often window-dress their portfolios at the end of a quarter by adding to holdings that have performed well recently. That can push up the stocks’ prices, improving the managers’ performance results that are reported to clients at quarter-end.

Today is the last trading day of the third quarter.

After peaking in 2000, the Dow sank 4,436 points, or 38%, in the bear market that followed, amid a recession and a plunge in corporate earnings.

The index bottomed at 7,286.27 on Oct. 9, 2002. It is up 61% since then.

This year the Dow is up 9.3%, the S&P; 500 is up 7.3% and the Nasdaq composite is up 2.9%.

Among Thursday’s market highlights:

* General Motors led the Dow higher, gaining 78 cents, or 2.4%, to $33.06 after investor Kirk Kerkorian said he wanted to boost his 9.9% GM stake.

Also in the Dow, Intel added 38 cents, or 1.9%, to $20.77. Citigroup raised its fourth-quarter earnings estimate for the chip giant to 26 cents from 24 cents.

* Some Internet-related issues attracted buyers. EBay rose $1.29 to $28.41. The stock has been the subject of merger speculation recently. Also in the sector, Yahoo added 68 cents to $25.33 and Monster Worldwide was up $1.01 to $36.29.

* Energy-related stocks were mostly lower as oil prices dipped. Near-term crude futures lost 20 cents to $62.76 a barrel in New York. Baker Hughes fell 85 cents to $66.96, Transocean dropped 92 cents to $71.96 and Apache slipped 23 cents to $63.15.

* American Greetings tumbled $2.21 to $22.83. The maker of greeting cards and gift-wrap said its fiscal second-quarter loss, excluding some items, was 23 cents a share. Analysts surveyed by Thomson Financial expected a 16-cent loss, on average.

* In foreign trading, Mexico’s IPC stock index closed at a record high, rising 0.5% to 21,748. It is up 22.8% this year in pesos and 18.3% in dollars.

* Long-term Treasury bond yields were slightly higher, despite a strong reception for the government’s sale of $14 billion in new five-year notes. The notes were sold at a yield of 4.57%.

The 10-year T-note yield, a benchmark for mortgages and other long-term rates, inched up to 4.61% from 4.6% on Wednesday. The yield hit a seven-month low of 4.54% on Monday, and is down from a four-year high of 5.24% in late June.