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Dow rides raging bull market back above 12,000 mark

NEW YORK — Two years ago, the stock market was roadkill along the financial highway. Now one of the greatest bull markets in history is rolling along — maybe enough to finally get the attention of average investors.

The Dow Jones Industrial Average closed above 12,000 for the first time in 21/2 years Tuesday, putting the Great Recession even farther in the rearview mirror.

A broader measure of the stock market, the Standard & Poor's 500 index, closed above 1,300 for the first time since Aug. 28, 2008. And at least one widely watched measure suggests stocks are still cheap by historical standards.

The remarkable run for stocks began on March 9, 2009. The Dow stood at 6,547, its lowest point in 12 years. Since then, in the fastest climb since the Great Depression, it has risen 84 percent thanks to surging corporate profits, the unexpected resilience of personal spending and a bond-buying intervention by the Federal Reserve that made stocks more appealing. And some of the early gains came because investors realized that stocks had fallen too far during the financial crisis.

The Dow closed at 12,040.16 on Tuesday, advancing 148.23 points after strong corporate earnings reports and signs that the manufacturing sector had a good month in January. The S&P 500 closed at 1,307.59, up 21.47 points.

The rebound could bring small investors back to the stock market. They have pulled nearly $245 billion out of U.S. stock mutual funds since June 2008, the last time the Dow was at 12,000, according to the Investment Company Institute.

And if Americans believe in the stock market again, it could accelerate the economic recovery.

"The lack of confidence has acted as a sedative across the economy," says David Kelly, chief market strategist at J.P. Morgan Funds. "The Dow at 12,000 could boost the psychology of the American investor and be a more powerful stimulant than anything else."

Businesses have been sitting on an enormous pile of cash — the biggest as a share of their total assets since 1959. They are starting to spend a little, upgrading their computer systems and buying basic materials in order to expand — even if they have yet to hire again in great numbers.

"We are at a new stage in the economy," says Liz Ann Sonders, chief market strategist at Charles Schwab. "There is a tremendous amount of pent-up demand for business capital spending."

The stock market's gains haven't been matched elsewhere. Real estate prices in some cities are still near the lows they hit at the worst of the financial crisis. Economists expect that this year could bring record foreclosures. Some state and local governments are struggling to provide basic services, and the federal deficit is at its highest level as a percentage of GDP since the end of World War II.

Now the economy is expanding again. But the unemployment rate is 9.4 percent. Millions are unable to afford to invest in a stock rally passing them by.

Dow rides raging bull market back above 12,000 mark 02/01/11 [Last modified: Tuesday, February 1, 2011 9:01pm]
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