NEW YORK, N.Y. – The Dow has never been higher.
The Dow Jones industrial average surged passed its all-time high and kept going on Tuesday. It jumped up from the opening bell, climbed as much as 158 points early and reached 14,286, breaking through its previous record high set in October 2007.
The index fell back slightly and was trading up 136 points, or less than 1 per cent, at 14,264 as of 12:35 p.m. (1735 GMT).
The gains represent a remarkable comeback for the stock market. The Dow has more than doubled since falling to a low of 6,547 in March 2009 following the financial crisis and the Great Recession. Stocks have rebounded sharply since then with the help of a large dose of stimulus from the Federal Reserve, even as the economic recovery has been slow and steady rather than spectacular.
“Whether they want to admit it or not, everyone is very impressed with the resilience of the market,” said Alec Young, a global equity strategist at S&P Capital IQ.
The last time the Dow was this high, Apple had just sold its first iPhone and George W. Bush had another year as president. The U.S. housing market had yet to implode, and the financial crisis that brought down Lehman Brothers was still a year away.
The recovery in stocks may even have been quicker, had memories of the financial system’s near collapse not been on investors minds, says Robert Pavlik, chief market strategist at Banyan Partners.
“It’s still pretty close to the front of people’s brains,” says Pavlik. “That’s one of the reasons that people are hesitant to invest in the stock market.”
Despite the gains in the stock market since then, the U.S. economy has not fared nearly as well. Unemployment was just 4.7 per cent when the Dow last reached a record five and half years ago, versus 7.9 per cent today.
But the economy is strengthening in many areas. Housing is recovering, companies are hiring more and Corporate America’s earnings are strong. That’s fueled a 9 per cent rise in stocks this year, impressing even the most ardent skeptics. For all of last year, the index rose 7 per cent.
Stocks are also benefiting from the economic stimulus from the Federal Reserve and other global central banks. The U.S. central bank is buying $85 billion each month in Treasury bonds and mortgage-backed securities to keep long-term interest rates very low.
If the Dow continues Tuesday at its torrid pace, it will finish above its record close of 14,164 from Oct. 9, 2007.
Tuesday’s gains were driven by industrial and technology stocks. United Technologies rose $2.10 to $91.22, IBM advanced $1.84 to $207 and 3M rose $1.46 to $104.70, pushing the Dow higher.
That’s a signal that investors are optimistic about the economy, since those companies stand to gain the most when the economy recovers. More stable, conservative stocks like utilities and consumer staples logged smaller gains.
From its March 2009 low to today, gains for the 30-member Dow have been led by American Express, up almost 500 per cent. Home Depot has jumped almost 300 per cent, according to data from S&P Dow Jones Indices. Hewlett Packard is the only stock in the index that is lower than it was four years ago, falling 22 per cent.
On Tuesday, investors received another piece of positive news on the U.S. economy, a report that U.S. service companies grew in February at the fastest pace in a year, thanks to higher sales and more new orders. The gain suggests higher taxes have yet to slow consumer spending on services.
Home builder PulteGroup rose 42 cents to $20.12 following news that home prices rose at the fastest pace in almost six years in January, a sign that the housing market is gaining momentum as it nears the spring selling season. Home prices rose 9.7 per cent in January from a year ago and had the biggest gain since April 2006, according to data released by CoreLogic
The Standard & Poor’s 500 index rose 16 points, or 1 per cent, to 1,541, within striking distance of its own record close of 1,565. The Nasdaq composite gained 41 points, or 1.3 per cent, to 3,223.
The yield on the 10-year Treasury note, which moves inversely to its price, rose two basis point to 1.90 per cent.
Among other stocks making big moves:
— Ascena Retail Group gained $2.30 to $18.84 after the clothing store reported stronger-than-expected sales in its most recent quarter.
— J.C. Penney fell $1.52 to $15.21 following media reports that one of its largest shareholders is selling a major stake in the retailer. CNBC and The Wall Street Journal reported that Deutsche Bank is shopping around the sale of 10 million shares of the company’s stock held by Vornado Realty Trust, a real estate investment trust.