Dow quits recovery mode for 1st close above 12,000

Markets Yesterday's Close

October 20, 2006|By Robert Manor | Robert Manor,Chicago Tribune

The Dow Jones industrial average closed above 12,000 for the first time yesterday, a hard-fought milestone for a stock market index that has struggled in recent years to recapture the momentum that came so easily in the 1990s.

The breakthrough came without any great leap, as the Dow hovered just above or below 12,000 for two days. But the stock market has been strong for weeks, and the new peak reflects confidence by investors in some large companies - even at a time when the economy is sending mixed signals.

The Dow's latest milestone came on the anniversary of Black Monday in 1987, when the Dow plunged 508 points and also suffered its biggest one-day percentage drop in history. The Dow finished that day at 1,738.74.

The record appears psychologically significant because the Dow had been trapped for so long in recovery mode from the dot.com bust of 2000, when stocks topped out at 11,722. The index has traded in the 11,000 range or well below it since then.

Some market observers say one should not read too much into the Dow's new high of 12,011.73, a gain of 19.05.

"In the great scheme of things, it is not significant at all," said Thomas Wirth, senior investment officer of Chemung Canal Trust of Elmira, N.Y. "But there are psychological barriers."

The rise above 12,000 might brighten investor psychology and push stocks a little higher, Wirth said. But he said inflation, the economy, future interest rates and even the results of next month's elections are more significant.

While the Dow finished strong, the stock market as a whole was much more mixed, with other indexes showing less strength and some even going down.

The Standard & Poor's 500 barely moved, rising just 1 point to close at 1,366.96. The Nasdaq rose 3.79 to 2,340.94. The Sun-Bloomberg index of the top stocks in Maryland gained 0.28 to 349.87. Coventry Health Care Inc. rose $1.17 to $49.23, while United Therapeutics Corp. rose $1.16 to $57.21.

The unenthusiastic day for the broader stock market stemmed from some tepid economic reports. The Conference Board's index of U.S. leading economic indicators rose less than forecast in September. Meanwhile, the Philadelphia Fed's general economic index contracted for the first time since April 2003.

Advancing issues outnumbered decliners by almost 4-to-3 on the New York Stock Exchange, where consolidated volume came to 2.65 billion shares.

The Russell 2000 index of smaller companies was up 3.98 at 767.39.

Overseas, Japan's Nikkei stock average closed lower by 0.61 percent; Britain's FTSE 100 climbed 0.09 percent; Germany's DAX index was down 0.09 percent; and France's CAC-40 fell 0.03 percent.

For several years small company stocks outperformed those of large companies. But this year the Dow, the pre-eminent measure of big business, has regained its strength.

Robert Manor writes for the Chicago Tribune. The Associated Press and Bloomberg News contributed to this article.

Stock of interest

Coca-Cola Co.

Shares rose 95 cents to $44.91 after the company reported a 14 percent quarterly gain aided by sales in Europe due to the World Cup soccer promotions and growth in emerging markets.

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