By CHRISTINE HAUSER
Published: February 28, 2012
The index, which tracks 30 of the biggest companies on Wall Street, last surpassed the milestone mark in a closing on May 19, 2008, when it ended trading at 13,028.16.
February has been a good month for the Dow Jones industrial average as it trades at levels not seen since the 2008-9 financial crisis. And after several narrow misses, it mustered enough momentum to pull itself firmly across the 13,000 threshold on Tuesday and stay there through the close.
As it did twice last week and on Monday, the Dow poked through the 13,000 level in intraday trading on Tuesday but then dropped back down toward the end of the day before a final surge that pushed it up to about 13,005.
It was a day marked by a handful of economic reports that were generally positive. The Conference Board’s measure of consumer confidence registered a 12-month high of 70.8 this month, a reflection presumably of continued improvement in labor market conditions, economists from Capital Economics said in a research note. Home prices, however, have fallen, with the 20-city Standard & Poor’s/Case-Shiller index declining 4 percent in December year-over-year. Durable goods orders fell 4 percent in January, but aircraft orders accounted for much of the drag.
The Dow is up nearly 3 percent for the month. Analysts said that the gains reflected the culmination of a generally upward trend in stocks since the beginning of the year. But they were also quick to point out that it said more about improving sentiment in the financial markets and the performance of individual companies than about a rebound in the economy since the recession ended in mid-2009.
“Thirteen thousand is not so very important technically as it is emotionally, simply because it is not 12,000,” Dan McMahon, the head of equity trading at Raymond James & Associates, said earlier Tuesday. “It is on the way to 14,000. It is kind of a landmark on the way.”
“The market has rallied significantly since the October lows and everything seems to be trending in the right direction,” Mr. McMahon added. “We are waiting for the next catalyst.”
Mr. McMahon said a better barometer for the market in general was the Standard & Poor’s 500-stock index, which measures the broader market, and has already hit its own precrisis levels. It closed Friday at its highest level since June 2008. Other broader measures of the market, such as the Russell 50, which includes the largest capitalization stocks, have already recovered as well.
“The stock market has been going up pretty consistently since October,” Dan Greenhaus, the chief global strategist at BTIG.
The Dow hit a 52-week low of 10,655.30 on Oct. 3. All 30 companies have risen since then, but about a third are responsible for most of the gains in the index, based on how they are weighted. The top contributor was Caterpillar, a stock that reflects the ups and downs in the economy, particularly in construction. It has accounted for more than 343 points in the index rise since the October trough. IBM and Exxon, helped by a rise in oil prices, each also accounted for more than 100 points, as did McDonald’s.
“It takes just a couple names to get it going in one direction or the other,” said Owen Fitzpatrick, head of U.S. equity strategy for DWS. Mr. Fitzpatrick said, in general, some of the issues that propelled the sell-off of last summer have eased, such as the concerns that the United States would follow Europe into a recession.
Future catalysts include strong gross domestic product data, or other signs the economy is stable, Mr. McMahon said.
Mr. Greenhaus said the closing threshold for the Dow “technically means nothing” when seen in the context of the wider, uneven economic recovery.
“People who hung in there have now seen their investment return to pre-crisis levels,” he said in a recent interview. But he added: “People are still going to say ‘I still don’t have a job.’”
Since the financial crisis companies have achieved good results with cost-cutting and hoarding cash. Some, like McDonald’s, have reoriented their approach to the tighter economy.
McDonald’s, one of the Top 10 contributors to the Dow’s strong rise since October, is now up more than 60 percent since before the financial crisis. Sara Senatore, a senior research analyst at Sanford C. Bernstein & Co., Inc. said many fast-food and casual restaurants have done well during the economic downturn, but McDonald’s also has a global footprint with growth in other economies that has helped it to do well. In addition, it has done an “excellent job” innovating and re-imaging, with new beverages and Wi-Fi in some outlets that allowed it to persist when the economy improved.
“You could make the case people traded down during the recession and haven’t traded back out, or up, as much as you might have thought,” she said
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