Dow ends above 14,000 for 1st time since Oct. 2007 on jobs report
NEW YORK — The Dow closed above 14,000 on Friday for the first time in more than five years.
It was just a number on a board, but it was enough to raise the hopes of some investors and cause others concern about an overheated market. And it brought reminders of a different era, before the financial crisis rocked the world economy.
The Dow Jones industrial average, a stock market index that is traditionally considered a benchmark for how the entire market is faring, had been rising fairly steadily for about a month. On Friday, strong auto sales and optimism about U.S. job growth pushed it over the mark.
The Dow is now just 155 points away from its record close.
“There's a newfound enthusiasm for the equity market,” said Jim Russell, regional investment director at U.S. Bank Wealth Management in Minneapolis.
Market watchers were divided over what the Dow milestone — or even what a potential new all-time high — really means. To some, it's an important booster to hearts and minds, making investors feel optimistic and thus more willing to bet on the market.
“The Dow touching 14,000, it matters psychologically,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. “It attracts smaller investors.”
And those investors, until recently, had been shying away from stocks. Since April 2011, investors have pulled more cash out of U.S. stock mutual funds than they've put in, according to the Investment Company Institute. In the past three weeks, though, that trend has reversed, which could make January the first month in nearly two years in which stock-focused funds had a net inflow.
To others, though, a Dow 14,000 is nothing but a number, a sign more of how traders feel than of the economy. And it's not even the best number on the board, some traders say. Professional investors usually pay more heed to the Standard & Poor's main index, which tracks 500 companies compared with the Dow's 30. The Dow garners attention, they say, because it's more familiar to the general public.
Joe Gordon, managing partner at Gordon Asset Management in North Carolina, was not celebrating on Friday. He thinks the gains won't last. The fact that small investors are finally piling back in the stock market, he said, is not a reason for optimism but a sign that it's getting overhyped and due to fall.
After the Dow hit its all-time record in 2007, it fell almost steadily for the next year and a half. It lost more than half of its value before starting to tick back up again.
“It is good trivia to talk about on television and the radio,” Gordon said, referring to the 14,000 mark. “It's meaningless to the average professional.” And for workers still unemployed by the financial crisis, he said, “it really means nothing to them.”
If there is dissent over what a Dow 14,000 signifies, what's undeniable is that it's a rarefied event.
Before Friday, the Dow had closed above 14,000 just nine times in its history. The first time was in July 2007; the rest were in October of that year.
The last time the Dow closed over that mark was Oct. 12, 2007, when it settled at 14,093.08. It had reached its all-time record, 14,164.53, three days before that.
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