Dow recovery continues

The Dow Jones industrial average reached a milestone today in Wall Street’s near seven-year recovery from corporate upheaval, economic recession and terrorism, briefly trading above its record high close of 11,722.98 set on January 14, 2000.

The index of 30 blue chip stocks surpassed its record, rising to 11,724.86 in early morning trading.

Stocks closed only modestly higher amid a dearth of news that could motivate investors.

“These numbers sometimes tend to act as magnets and the market sometimes pulled up toward it,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco.

The Dow rose 29.21, or 0.25%, to 11,718.45. It has yet to reach its all-time trading high of 11,750.28, also set on January 14, 2000.

The broader Standard & Poor’s 500 and Nasdaq composite indexes are far off their all-time highs, although their records were reached around the same time.

The S&P, which gained 2.56, or 0.19%, to close at 1,339.15, is still about 188 points below its closing high of 1,527.46, but is at a 5-year high. The Nasdaq, which rose 6.63, or 0.29%, to 2,270.02, is not expected to approach its high close of 5,048.62 soon.

The Dow, whose large-cap stocks range from aluminium producer Alcoa to discount retailer Wal-Mart Stores, was the first big index to recover because it did not rise as much in value as the S&P 500 and the Nasdaq in 2000.

The last time the Dow stood at these levels, Wall Street was propelled by wide-eyed investors eager for a slice of the wealth being generated by the dot-com and housing booms. Traders raced to buy any stocks that looked remotely promising, catapulting the major indexes sharply higher.

But after early 2000, the market began to crumble, slowly at first as doubts about the high-tech boom set in. Signs of recession accelerated the decline, and then the September 11, 2001 terror attacks and their aftermath, including earnings declines and losses in many industries, sent stocks plunging.

It did not stop there – corporate scandals including the collapse of Enron and WorldCom also shook Wall Street. The combination of all these factors devastated stocks, sending the Dow to a five-year closing low of 7,286.27 on October 9, 2002, nearly 38% off its record high close.

Wall Street made its way back slowly, with investors behaving more cautiously and limiting their exposure to risk as they regained faith in stocks. What has also helped is more than four years of sturdy corporate profit growth despite the threat that energy prices and interest rates would damage consumer spending and companies’ bottom lines.

More recently, the Federal Reserve’s decision to pause after more than two years of interest rate hikes and evidence the US economy is moderating, not heading for a hard landing, gave investors the impetus to push the Dow past its high close.

Today, the economic news was mixed. While jobless claims fell, dropping close to economists’ expectations, the Commerce Department revised its gross domestic product figure for spring to 2.6% from 2.9%.

The number of new people signing up for unemployment benefits dropped last week. The Labour Department reported today that new applications filed for unemployment insurance declined by a seasonally adjusted 6,000 to 316,000 for the work week ending September 23. The latest showing on claims was close to economists’ expectations for claims to total around 315,000 last week.

Bonds fell, with the yield on the 10-year Treasury note at 4.62%, up from 4.59%. The dollar rose against other major currencies. Gold prices also rose.

Crude oil futures fell. A barrel of light crude settled at $62.76, down 20 cents, on the New York Mercantile Exchange.

In corporate news, General Motors rose 78 cents to 33.06 after dissident shareholder Kirk Kerkorian told GM he is interested in buying up to 12 million more shares of the company as he presses the carmaker to enter a three-way alliance with Renault and Nissan.

Hewlett-Packard, which is drawing scrutiny from Congress over a corporate spying probe, rose 58 cents to 35.97 after the company announced the resignation of general counsel Ann Baskins.

American Greetings Corp, the US’s second-largest greeting cards maker, fell 2.21 to 22.83 after swinging to a loss in the second quarter from a year-ago profit, due in part to new marketing and operational initiatives.

Advancing issues led decliners 8 to 7 on the New York Stock Exchange, where volume totalled 1.73 billion shares, down from 1.72 billion at the same time on Wednesday.

The Russell 2000 index of smaller companies fell 0.30, or 0.04%, to 732.24.

Elsewhere, Japan’s Nikkei stock average rose 0.48%. The FTSE 100 rose 0.69%, Germany’s DAX index slipped 0.01%, and France’s CAC-40 gained 0.13%.