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Dow Jones, S&P set record highs

| Saturday, May 4, 2013, 12:01 a.m.
A specialist wears a 'Dow 15,000' hat as he works at his post on the floor of the New York Stock Exchange Friday, May 3, 2013. A big gain in the job market lifted the stock market to a record high. The stock market surged, traders donned party hats, and the wave of buying drove three indexes through major milestones.

Not long after stock markets crossed into record territory on Friday, John Spinosi popped into a Charles Schwab investment office Downtown over his lunch break to discuss selling shares he owns in a financial services company.

Spinosi thought it time to cash out after watching the run-up in the markets so far this year. The Standard & Poor's 500 index and the Dow Jones industrial average hit new highs on Friday after a better-than-expected government report on hiring.

“I saw that they were hitting record highs, and I thought, how long do you want to hold onto it?” the 56-year-old Hopewell resident said after walking out of the office on Grant Street.

Most of Spinosi's investments are in mutual funds, he said. But he has held onto shares of Fiserv Inc., a Milwaukee company that purchased data-processing units from the former Mellon Financial in the 1990s.

Fiserv hit a record high this week, a level that would quadruple Spinosi's investment, and he wanted to collect his profit before the shares tumbled.

“I've sat on the sidelines and got creamed,” he said, referring to past experiences with investing.

Many investors may have been thinking the same thing on Friday. But financial advisers cautioned that investors need to have a long-term plan and avoid the influence of day-to-day fluctuations.

Stock markets surged past new milestones on Friday as the government reported that employers added 165,000 jobs last month.

The Dow crossed 15,000 for the first time, and the S&P 500 broke through 1,600. The Dow gave up some of its gains but still closed up 142 points at 14,973, an increase of 1 percent. The S&P 500 surged 16, or 1 percent, to 1,614.

The Dow is up 14 percent this year; the S&P, 13 percent.

“Most clients are a little skittish because the market has run up,” said Louis Stanasolovich, CEO of Legend Financial Advisors in Ross. “There's a fear that it is going to turn around at any moment. We would say that's not the case.”

The Federal Reserve's efforts to boost the economy are fueling the strong rise in stock markets. The central bank has been buying billions of dollars worth of bonds a month, a move that pumps money into the economy and lowers interest rates. By making borrowing cheap, the theory goes, businesses will be more likely to borrow for new investments, which should create new jobs.

“Earlier this week, the Fed said they would extend easy money for as far as the eye can see,” said Kim Forrest, senior equity analyst at Fort Pitt Capital Group in Green Tree.

With interest rates low, bonds, savings accounts and certificates of deposit — the lowest-risk investment vehicles — yield very little returns for investors, Forrest said.

Dividend-paying stocks have “become the replacement for the 5 percent savings account,” she said.

Beth Lynch, investment adviser for Schneider Downs, Downtown, said she has received calls from clients asking, “Is it a time to sell? Can it really go any higher?”

“We do take a long-term view of investing,” she said. “There's no reason to panic with where we're going. … You really can't time the market.”

Some investors may still remember being burned in the late-1990s technology-stock bubble.

Norman Robertson, economic adviser to Smithfield Trust Co., Downtown, said investors should be cautious about a bubble — if stock prices continue to climb without solid economic growth and company earnings.

But, Robertson said, “there's no real evidence for that at the moment.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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