Tuesday, February 21, 2012
The Dow Jones industrial average crossed 13,000 on Tuesday for the first time since before the 2008 financial crisis.
The Dow passed 13,000 about two hours into the trading day, then quickly dropped back. Its last time above 13,000 during a trading day was May 20, 2008, four months before the Lehman Brothers investment bank went under.
U.S. stocks got help from a long-awaited bailout deal for Greece, aimed at preventing a potentially catastrophic default, and from strong corporate earnings reports at home.
Just after 11:30 a.m. EST, the Dow was up 41 points at 12,990. In other trading, the Standard & Poor's 500 was up five points at 1,366. The Nasdaq composite index was up 10 points at 2,962.
The last time the Dow was above 13,000, the unemployment rate was 5.4 percent, far below today's 8.3 percent. The Great Recession was six months old, with the worst still to come.
The 13,000 level is a psychological milepost, but in a market built on perception, it could influence more cautious investors to pump more money back into the stock market, analysts said.
"You need notches along the way to measure things, and that's as good as any," said John Manley, chief equity strategist for Wells Fargo's funds group. "Is 50 older than 49 and a half? Yes, by six months. Do those six months really make a difference? Probably not. But it does give us a fixed point, something we can look at."
Just last summer, the Dow unburdened itself of 2,000 points in three terrifying weeks. It fell as low as 10,655 in the fall, after a downgrade of the United States credit rating and a fight over the federal government's borrowing limit.
The 13,000 marker is a 22 percent rally from that low. The Dow is within 1,200 points of its all-time closing high — 14,164, set Oct. 9, 2007.
Under the bailout deal, Greece will get €130 billion, or about $172 billion, from other European nations and the International Monetary Fund. It will also owe €107 billion less to investors who own its government bonds.
After months of the talks crawling along and vague headlines yanking the market up and down, the conclusion was almost anticlimactic, with an agreement already expected by the markets.
European markets fell after the Greece deal was announced. Stocks were down almost 4 percent in Greece, a little more than 1 percent in Spain and less than 1 percent in France and Britain. But the euro rose slightly at $1.32, which could be seen as a sign of confidence in European markets.
Investors noted that Greece remains in deep recession. Its private-sector investors were also forced to take a 53.5 percent loss on the face value of their bonds, which could discourage future investment.
The U.S. stock market has climbed steadily this year, primarily because of optimism about the economy. High gasoline prices are emerging as a chief concern for the economic recovery for the rest of the year, though.
A gallon of regular costs $3.57 on average, 40 cents more than a year ago and the highest on record for this time of year. With tension building over Iran's nuclear ambitions, Iran has halted oil exports to Britain and France and threatened to stop shipping to other European countries.
On Tuesday, U.S. markets enjoyed strong earnings reports from several big-name companies, including Home Depot and Dollar Thrifty. The exception was Wal-Mart, which reported a 15 percent drop in quarterly profits.
Overall, though, investors seemed comfortable moving money into the higher-risk stock market and out of safer investments like government bonds. The yield on the government's benchmark 10-year Treasury note rose to 2.05 percent from 2.01 percent Friday, a sign that fewer investors wanted the bonds.