NEW YORK (AP) – The Dow Jones industrial average swept past 14,000 for the first time Tuesday after a mostly tame inflation reading gave investors reason to extend an extraordinary – but perhaps questionable – Wall Street rally.
The stock market’s best-known indicator crossed 14,000 in the first half-hour of trading though it didn’t close above that level; it did, however, manage its fourth record close in as many sessions. The Dow rose as high as 14,021.95, having taken just 57 trading days to make the trip from 13,000. Broader market indicators closed mixed.
Stocks have risen fairly steadily since the spring amid a continuum of buyout news and evidence that despite higher fuel prices and the ongoing problems in the housing market and mortgage lending industry, consumers are spending and companies are still finding room for growth. With the Federal Reserve ever vigilant about inflation, any news that prices are rising at a moderate pace has added to the market’s momentum, as it did Tuesday.
The release of generally upbeat earnings reports also helped reassure a market that had worried that a slowing economy and rising energy prices could cut into corporate profits.
But the Dow’s latest accomplishment does raise questions about whether investors are buying more on speculation than fundamentals – and whether these gains can hold. The market still faces issues including rising oil prices that could crimp consumer spending. And a drop in takeover deals could puncture investor sentiment, as could a further souring of subprime loans amid a cooling housing market.
The past week shows how easily swayed Wall Street can be. A week ago, the average tumbled nearly 150 points after investors received a handful of disappointing profit forecasts. Only two days later, on Thursday, the Dow barreled 283 points higher as investors put a positive spin on a generally lackluster batch of retail sales reports.
“One of the things we know about the Dow being only 30 stocks is that it is a bit less representative of the entire market, but it is still a sign that large-cap multinationals continue to drive this market,” said Peter Dunay, an investment strategist with New York-based Leeb Capital Management. “For the moment, the momentum and strength is so good. You can’t fight it.”
Other observers were more upbeat about the market’s recent advance.
“You have the Dow moving up above 14,000 and it did not take that long, but you also have Nasdaq participating,” said Quincy Krosby, chief investment strategist for The Hartford, noting that the market’s rise appears broad-based.
“It’s forcing some money on the sidelines to come in,” she said, referring to reluctant money managers who have been awaiting a pullback to enter the market. “Needless to say, the higher it goes and the quicker it goes, the more susceptible you are to a pullback. A pullback would be healthy and normal.”
The Dow rose 20.57, or 0.15 percent, to close at 13,971.55.
Broader stock indicators ended mixed. The Standard & Poor’s 500 index slipped 0.15, or 0.01 percent, to 1,549.37 having set its own record highs in recent sessions. The Nasdaq composite index rose 14.96, or 0.55 percent, to 2,712.29.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 2.96 billion shares compared with 2.70 billion shares traded Monday.
Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 5.06 percent from 5.04 percent late Monday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 13 cents to $74.02 per barrel on the New York Mercantile Exchange, after trading as high as $75.35 per barrel. Oil hasn’t closed above $75 since last August.
The short time that it took the Dow to pass this its milestone recalls its ascent during the dot-com boom, especially because it took only 129 days to make the passage from 12,000 to 13,000. In the late 1990s, the Dow took just 24 days to go from 10,000 to 11,000, and 89 days to go from 6,000 to 7,000.
The end of the high-tech boom plus the recession and the aftermath of the Sept. 11, 2001, terror attacks helped send all the major market indexes into reverse. It took the Dow 7 1/2 years to trek from 11,000 to 12,000, and only last October began setting its first record highs since January 2000. The Dow has since logged 53 record closes including Tuesday’s gains.
The Dow’s run from 13,000 to 14,000 has been led by big-name manufacturers and producers rather than the financial or drug companies that also populate the Dow. Diversified manufacturer 3M Co., construction-equipment maker Caterpillar Inc., aluminum producer Alcoa Inc. and energy company Exxon Mobil Corp. were among the biggest contributors to the Dow’s move, while financial services company JP Morgan Chase & Co. and Johnson & Johnson were laggards.
The S&P 500 has also surpassed its early 2000 highs, reaching a new closing high last month and last week surpassing its trading high. The Nasdaq, which was inflated by the high-tech boom, is not expected to approach its closing high of 5,048.62 made in 2000 in the foreseeable future.
The move higher Tuesday came as Wall Street sorted through a somewhat mixed inflation reading and profit reports from blue chip names including Coca-Cola Co.
The gains also follow the Labor Department’s report that inflation at the wholesale level fell in June but the so-called core figure, which excludes often-volatile food and energy costs, heated up more than expected. Wall Street appeared unfazed by the increase in the core reading as it largely stemmed from higher vehicle prices.
Rising prices in recent months have unnerved some investors, who are concerned that inflation will hamper consumers’ ability to keep up their spending.
The flurry of news this week could affirm or undermine Wall Street’s recent confidence. Eleven of the Dow components report quarterly financial results.
Among the companies weighing in Tuesday, Coca-Cola saw its second-quarter profit rise 1 percent as sales at the world’s largest beverage maker rose 19 percent. Case volume slipped 2 percent in the company’s key North America market, however. The stock fell 68 cents to $53.17.
Word of buyouts continued, as Dutch chemicals company Basell agreed to acquire U.S. rival Lyondell Chemical Co. for $12.1 billion in cash. Including debt, the deal’s size totals about $19 billion. Lyondell jumped $6.93, or 17.3 percent, to $47.05.
In market action abroad, Britain’s FTSE 100 fell 0.58 percent, Germany’s DAX index fell 0.83 percent, and France’s CAC-40 fell 0.43 percent. In Asia, Japan’s Nikkei stock average fell 0.12 percent.
The Russell 2000 index of smaller companies rose 1.42, or 0.17 percent, to 849.89.