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For the Dow, another blast past the 13,000 mark
The Dow pulverized the 13,000 mark on Friday, soaring not only through it but finishing 75 points above it.
It was a target the Dow hadn’t hit since early May. It was also a reminder of earlier heydays, before the financial crisis shattered the stock market. It meant the Dow was just an 8 percent rally away from its all-time high reached in October 2007.
And to many professional market watchers, it was just a big yawn.
“We’ve gone up through it before and down through it before,” said an unimpressed Jim Millstein, CEO of the financial advisory firm Millstein & Co. in Washington, D.C. “It’s obviously not insulation against any future volatility.”
“It’s only 30 stocks,” added Mitch Schlesinger, chief investment officer at FBB Capital Partners in Maryland.
No matter how you feel about the Dow, here’s more information to help you understand what happened Friday.
—WHAT IS THE DOW? The Dow refers to the Dow Jones industrial average. It’s an index of 30 stocks, all of them big, well-known companies like Microsoft and General Electric. It’s supposed to give investors a general sense of how the overall stock market is doing.
—WHAT’S SPECIAL ABOUT 13,000? It’s a key milestone. The very first time the Dow crossed that mark was in April 2007, in what seemed like go-go days for the U.S. economy. It reached an all-time high of 14,164.53 that October. But it steadily declined for months afterward, and when it crossed below 13,000 in May 2008, it didn’t return to that level for nearly four years.
—WHAT HAPPENED THEN? The Dow closed above 13,000 again on Feb. 28 of this year, and it flitted above that level for most of the next two months. Until Friday, the last time it closed above 13,000 was May 7.
—WHAT DOES IT MEAN? The psychological effect can be important. When investors see the Dow pass a big, round number, it can make them feel better about the economy and thus more willing to spend and invest.
Like the rest of the stock market, the Dow tracks how traders feel more than it tracks the underlying fundamentals of the economy. The fact that it’s above 13,000 doesn’t erase deep concerns about sluggish economic growth or high unemployment rates in the U.S.
—WHAT WILL HAPPEN THIS TIME? That’s anyone’s guess, but the last rally was short-lived. The Dow peaked for the year at 13,279 on May 1. Then, spooked by a dismal jobs report, it plunged 444 points in the following six trading days, bringing it back below 13,000.
By Tom Fitton
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