US stocks shrug off higher gas prices to push Dow above 13,000
Better economic news from Europe helped lift US stocks past the symbolic plateau. The Dow last closed above 13,000 in May 2008, before the collapse of the housing market.
New York — Buoyed by better financial news coming out of Europe, the Dow Jones Industrial Average finally closed above 13,000 Tuesday, the first time it had closed above this level since May of 2008, just before the collapse of the housing market.
Stock market analysts said the close at 13,005.12 is important for a number of reasons. First, it may prompt some investors who are sitting on the sidelines to rethink why they are not invested. Second, it will create a positive headline that may resonate on Main Street.
“For Main Street it’s a symbol,” says Fred Dickson, chief investment strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. “For some people, closing over 13,000 may say to them that the economy is a little bit better, that maybe they don’t have to worry so much about their jobs and retirement funds.”
Before Tuesday’s close, the Dow average had climbed over 13,000 four other times recently. However, each day sellers entered the market near the close, knocking the average below the milestone.
The Dow still has some distance to go to break its all-time record of 14,164, set Oct. 9, 2007. “That will be more interesting once it passes that milestone,” says Mr. Dickson.
Some investors may have also been cheered Tuesday to see the price of crude oil fall below $107 a barrel. If crude prices were to continue to retreat, it could relieve some pressure on consumers’ wallets, as prices for gasoline at the pump have been rising since October. On Tuesday, gasoline prices rose another 2 cents a gallon to a national average of almost $3.72 a gallon, according to AAA.
Some Wall Street observers said another catalyst for the Dow’s rise was the steadily improving economic news, including a drop in new claims for unemployment benefits and improved business confidence.
“The economy is doing good, and stocks are behaving very rationally relative to what I see in the economy,” says Jerry Harris, chief investment strategist at Sterne Agee, a brokerage firm based in Birmingham, Ala.
Over the last several months, Mr. Harris says, the markets have been focused on negative events, among them the possibility of Greece defaulting on its debt, an economic slowdown in China, and rising tensions between Israel and Iran.
“What if we started to tell a positive story instead of all these negative events?” he asks.
Some of those concerns started to be addressed this week. On Monday, after private investors agreed to take losses on their Greek bonds and the Greek government further tightened its belt, the German parliament approved a second Greek bailout package. Then, on Tuesday, European shares rose as investors were pleased to see that the European Central Bank indicated it would inject funds that would help European banks.
“We’re seeming more calmness and stability in Europe,” says Dickson.
The Dow rose despite the increase in the retail price of gasoline.
Solving the European debt situation would remove one major Wall Street worry, says John Silvia, chief economist at Wells Fargo Securities in Charlotte, N.C. “Once you take the European situation off the table, you take away the recession scenario.”
On Tuesday, however, the economic news was mixed. Looking back at 2011, the Case-Shiller index, which measures housing prices, found 19 out of 20 urban markets saw home prices decline. Detroit was the only exception, with home prices up 0.5 percent last year.
Also on Tuesday, the government reported that orders for durable goods fell 4 percent in January after rising the previous three months. Business investment has been a key reason for the better economic performance over the past year.
In a positive development for the economy, the Conference Board, a business research organization, said consumer confidence rose in February. The organization said Americans are more optimistic about jobs and their financial situation.