Dow leaps past 14,000 to new high
After mostly playing caboose in the 4 1/2 -year-old bull market, blue-chip stocks now are the locomotive.
The premier big-stock index -- the Dow Jones industrial average -- closed above the 14,000 mark Thursday for the first time, less than three months after hurdling 13,000.
The Dow jumped 82.19 points, or 0.6%, to end at 14,000.41, lifting its year-to-date gain to 12.3%.
Even amid rising pessimism about the U.S. housing downturn, and as oil prices near record highs, Wall Street keeps advancing. And the largest companies are leading the way -- a turnaround from the last few years, when small-company stocks were the market’s stars.
One reason for the strength in shares of big-name companies: Their global reach is a key advantage in a period of relatively weak growth in the U.S. economy, analysts say.
“Global growth continues to be revised upward,” said Larry Adam, chief investment strategist at brokerage Deutsche Bank Alex. Brown in Baltimore.
On Thursday, China said its economy grew at an 11.9% annualized rate in the second quarter, the fastest pace in more than 12 years.
Computer and software giant IBM on Wednesday said its Asian sales rose 10% in the second quarter, compared with a 6% rise for sales in the Americas.
Robust foreign business helped lift IBM’s earnings 12% in the quarter, exceeding analysts’ expectations.
IBM shares led the Dow’s surge Thursday, rising $4.78 to $115.86, a 5 1/2 -year high. The stock is up 19.3% this year.
Another Dow stock, machinery maker Caterpillar, rose 75 cents to a record $86.98 and is up 41.8% this year.
By contrast, the Russell 2,000 small-stock index, which rallied 0.7% to 851.85 on Thursday, is up 8.2% this year.
“It’s not surprising that we’re getting some catch-up” in blue-chip issues, said Michelle Clayman, chief investment officer at New Amsterdam Partners in New York. From the end of 2002 through 2006 the Russell index surged 106%, while the Dow was up 49%.
Many Wall Street pros have been predicting for two years that big-name stocks would take the lead in the market. It finally has happened this year.
Since the Dow crossed 13,000 for the first time April 25, it’s up 7%, nearly three times the Russell index’s gain in the period.
Many multinational companies are benefiting from the weak dollar because the currency’s slide can bolster profit earned overseas. The euro Thursday hit a fresh record high of $1.3803.
Still, the rising market tide this year has lifted almost all major indexes. The Standard & Poor’s 500 index Thursday rose 6.91 points, or 0.4%, to 1,553.08, a record high. It’s up 9.5% for the year.
The technology-dominated Nasdaq composite gained 20.55 points, or 0.8%, to 2,720.04, its highest close since 2001. Nasdaq has rallied 12.6% year to date.
Generally healthy quarterly profit reports this week have been reinforcing the basic message of market optimists: Despite the housing market’s woes and high oil prices, the U.S. economy isn’t in danger of falling into recession. And with better growth abroad, the global economy overall is keeping corporate earnings moving up.
Al Goldman, market analyst at brokerage A.G. Edwards in St. Louis, said that many investors’ view of the depressed U.S. housing market was, “We’ve got a big problem in one segment of the economy, but it’s going to go away” eventually.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors continued to believe that rising mortgage defaults wouldn’t be significant enough to seriously hurt the broader domestic economy. While brokerage and many other financial services stocks are suffering because of the housing sector’s downturn, investors still are willing to bet on other sectors, he said.
New Amsterdam Partners’ Clayman said she was optimistic that the market by year-end would be up “modestly” from current levels, supported by earnings growth.
But she warned that the sharp daily swings of recent months could continue, testing investors’ resolve. Given the risks of more bad news from the housing market and from energy costs, “We certainly could have some very bad days ahead,” she said.
Google might trigger some selling today: After regular trading ended the company reported quarterly earnings that fell short of estimates. Its shares, which closed off 91 cents to $548.59 in regular trading, dived to $509 in after-hours trading.
Among Thursday’s market highlights:
* Winners topped losers by about 3 to 2 on the New York Stock Exchange and on Nasdaq.
* Strong earnings reports lifted a broad mix of stocks, including computer network company Juniper Networks, up $3.33 to $30.06; paint producer Sherwin-Williams, up $5.98 to $72.99; temporary-help firm Labor Ready, up $4.84 to $27.79; and Beverly Hills-based bank City National, up $1.79 to $75.73.
* On the downside, disappointing earnings clipped steel maker Nucor, which fell $1.19 to $61.13, and Los Angeles-based metal-processing firm Reliance Steel, which sank $3.81 to $57.21.
* American Home Mortgage, a lender specialized in adjustable-rate loans, tumbled $2.83 to $10.76 on rumors that a major investment bank would no longer supply credit to the firm. The company declined to comment.
* Oil prices continued to climb. Near-term futures in New York rose 87 cents to $75.92 a barrel, closing in on the all-time high of $77.03 set a year ago.
* Treasury bond yields were flat. The 10-year T-note ended at 5.02%, down from 5.03% on Wednesday.
walter.hamilton@latimes.com
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Hot blue chips
Big-name stocks are some of the market’s best performers this year, after years of trailing smaller issues.
*--* Stock YTD gain Alcoa +48.7% Caterpillar +41.8 Honeywell +34.8 Intel +24.7 Exxon Mobil +20.4 IBM +19.3 McDonald’s +18.8 3M +17.0 S&P; 500 +9.5
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Source: Bloomberg News
