Saturday, February 24, 2018
Business

Dow bounces back

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 of millions and a stock market plunge 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."

Ryan Detrick, senior technical strategist for Schaffer's Investment Research, said the Dow's milestone "wakes up a lot of investors who have missed a lot of this rally."

Tuesday's gain puts the Dow about 1,160 points below its all-time high, set Oct. 9, 2007, which came two months before the Great Recession began.

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.

Just last August, the Dow dropped 2,000 points in three 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 the crisis in Europe will 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's 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.

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.

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 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 the debt crisis in Europe. The price of gasoline has emerged as the latest concern. Economists worry about whether gas prices will climb high enough to cut into other consumer spending.

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