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Dow closes above 13,000 for first time since 2008
The Dow Jones industrial average on Tuesday reclaimed the last of the ground it held before the carnage of the Great Recession — bailouts, bank failures, layoffs by the million and a stock market panic that cut retirement savings in half.
The Dow closed above 13,000 for the first time since May 19, 2008, almost four months before the fall of the Lehman Brothers investment bank triggered the worst of the financial crisis.
It just cleared the mark — 13,005.12, up 23.61 points for the day.
"I think it's a momentous day for investor confidence," said Jack Ablin, chief investment officer at Harris Private Bank. "What this number implies is that the financial crisis that we were all losing sleep over, it never happened, because now we're back."
The average first pierced 13,000 last Tuesday but fell back by the close. It floated above hte milestone again on Friday and Monday, but slipped below both days. A strong rally for stocks this year seemed stalled as worry built on Wall Street about climbing prices for oil and gasoline.
But on Tuesday, the Dow got the final push from a report that consumer confidence jumped in February to its highest level in a year. Improved perceptions of the job market made the difference.
The report, which came out at 10 a.m., lifted the Dow over 13,000, and it stayed there for most of the day.
"Two months ago, we were talking about a double-dip recession. Now consumer confidence is growing," said Ryan Detrick, senior technical strategist for Schaffer's Investment Research. "A major milestone like 13,000 wakes up a lot of investors who have missed a lot of this rally."
The breaking of the 13,000 barrier continues a remarkable run for stocks this year. The Dow started with its best January since 1997 and has added to that gain. The index is up 6.5 percent for the young year.
Other averages have fared even better: The Standard & Poor's 500 is up 9 percent, the Russell 2000 index of smaller stocks is up 11 percent, and the Nasdaq composite index, dominated by technology stocks, is up 14 percent.
The other major indexes sit at multi-year highs as well. The S&P closed Tuesday at its highest level since June 2008, and the Nasdaq has not traded so high since December 2000, during the bursting of the bubble in technology stocks.
Just last August, the Dow dropped 2,000 points in three frightening weeks. Investors were worried about the European debt crisis, gridlock in Washington over the federal borrowing limit, a downgrade of the U.S. credit rating and the threat of another recession.
After Labor Day, the recession fears melted away. Since then, the stock market has been engaged in a tug-of-war between optimism over the improving American economy and fear that crisis in Europe would derail the U.S. recovery.
The optimists have been winning.
The Dow cruised to 13,000 the old-fashioned way, riding the economy higher. The unemployment rate has come down five months in a row, the first time that has happened since 1994.
The economy added 243,000 jobs in January, one of the three best months since 2006. Gains were surprisingly robust in industries across the economy, including the strongest hiring in manufacturing in a year.
In the stock market, the improving economy has translated to slow, steady gains — about 20 points a day for the Dow, averaged over the eight weeks. The index has gained more than 100 points on only three days, and it has not fallen 100 points on any day.
Seven of the 10 industry groups within the S&P 500 index were higher, with information technology and consumer discretionary stocks leading the way. Utility stocks, traditionally solid investments in a weak economy, were lower.
The Dow first cracked 13,000 on April 25, 2007, when the unemployment rate was 4.5 percent, far below today's 8.3 percent, and the economy was growing at a relatively healthy clip.
From there, it was a quick ride to the Dow's all-time high. The average crossed 14,000 in July 2007, then peaked at 14,164.53 on Oct. 9, 2007. Concerns about weak corporate earnings and tighter credit were already haunting the market, though.
The trip back down to 13,000 was less pleasant. It took little more than a month. Ten months later came the fall of Lehman Brothers investment bank and the financial meltdown. The Dow hit bottom on March 9, 2009, at 6,547.05.
Analysts say the stock market has grown accustomed to lingering threats this year, including a debt crisis in Europe and an economic recovery in the United States that is still not as strong as economists would like.
The price of gasoline has emerged as the latest worry. A gallon of regular costs $3.72 on average. The price has risen 21 days in a row. Economists worry about whether gas will climb high enough to cut into consumer spending in the rest of the economy.
John Manley, chief equity strategist for Wells Fargo's funds group, said investors haven't forgotten the "black swans" surrounding the market — a term traders use for events outside of what is normally predicted.
"We know that profits eventually have to come down, we know that something will happen in the Middle East, we know that Greece isn't going to do everything it says it's going to do. We're seeing black swans everywhere," Manley said.
He added: "But these issues have been around for a while."
• AP business writer Christina Rexrode in New York contributed to this report.
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