Dow hits year high

Wall Street pushed to new 52-week highs today as investors cautiously picked up shares on expectations of stronger growth in 2004. A heightened terror alert limited gains.

Trading was choppy and light as many investors got an early start on the Christmas holiday. The stock market will be open for a half session on Wednesday, close on Thursday for Christmas and then reopen for a half session on Friday.

“There’s a little bit of caution given the security alert,” said Russ Koesterich, US equity strategist at State Street in Boston. “That might be holding back what normally would be some follow through from last week’s gains.

“Generally speaking, this part of the year is seasonally very strong, and you’ve got strong earnings and economics backing up the market.

“If we can get past this blip due to the terror alert, we have the potential to go higher.”

The Dow Jones industrial average closed up 59.78, or 0.6%, at 10,338.00, having advanced 2.4% last week to notch its fourth straight week of gains.

Today the blue chip average rose to its highest level since May 17, 2002, when it stood at 10,353.08.

The broader market also rose. The Nasdaq composite index gained 4.78, or 0.3%, to 1,955.80, having edged up 0.1% last week.

And the Standard & Poor’s 500 index rose 4.28, or 0.4%, to 1,092.94, following a weekly gain of 1.4%.

The close was the highest level since May 23, 2002, when the index closed at 1,097.08.

On Sunday, the US government raised the national terror level to orange, indicating a high risk of terrorist attack. Homeland Security chief Tom Ridge said threat indicators are “perhaps greater now than at any point” since the September 11 attacks.

Stocks typically climb at the end of December and beginning of January as investors put year-end bonuses and dividends to work on optimism for the new year. But analysts have wondered whether the so-called Santa Claus rally would happen given this year’s solid gains.

Since hitting a low on March 11, the Dow is up 37%, the Nasdaq has climbed 54% and the S&P has gained about 37%.

“There’s a lot of uncertainty out there,” said Ed Peters, chief investment officer at PanAgora Asset Management. “The market has run up quite a bit. At the same time, we’re facing the new terror threat and anecdotal evidence that retail sales will be lower than expected.

“Those three things combined will make people hesitant to commit new money,” he said.

Advancing issues outnumbered decliners about 8 to 5 on the New York Stock Exchange.

The Russell 2000 index, a barometer of smaller company stocks, rose 2.49, or 0.5% to 549.37.