Stock Prices Fall After Dow Milestone
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NEW YORK (AP) – The Dow Jones industrial average reached a milestone in Wall Street’s recovery from nearly seven years of corporate upheaval, economic recession and the impact of terrorism Thursday, briefly trading above its record high close of 11,722.98 set back on Jan. 14, 2000.
Shortly after the index of 30 blue chip stocks surpassed its record, rising to 11,724.86 in early morning trading, stocks dropped amid a dearth of news that could motivate investors.
“These numbers sometimes tend to act as magnets and the market it sometimes pulled up toward it,” said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco.
In early afternoon trading, the Dow was down 13.05, or 0.11 percent, at 11,676.19. It has yet to reach its all-time trading high of 11,750.28, also set Jan. 14, 2000.
The broader Standard & Poor’s 500 and Nasdaq composite indexes are far off their highs, although their records were reached around the same time.
The S&P, down 1.33, or 0.10 percent, at 1,335.26, is still about 192 points below its closing high of 1,527.46, although it is at a 5 1/2-year high. The Nasdaq, down 4.94, or 0.22 percent, at 2,258.45, is not expected to approach its high close of 5,048.62 any time soon.
The Dow, whose large-cap stocks range from aluminum producer Alcoa Inc. to discount retailer Wal-Mart Stores Inc., was the first big index to recover because it did not rise as much in value as the S&P 500 and the Nasdaq in 2000.
The last time the Dow stood at these levels, Wall Street was propelled by wide-eyed investors eager for a slice of the wealth being generated by the dot-com and housing booms. Traders raced to buy any stocks that looked remotely promising, catapulting the major indexes sharply higher.
But after early 2000, the market began to crumble, slowly at first as doubts about the high-tech boom set in. Signs of recession accelerated the decline, and then the Sept. 11, 2001, terror attacks and their aftermath, including earnings declines and losses in many industries, sent stocks plunging.
It didn’t stop there – corporate scandals including the collapse of Enron Corp. and WorldCom Inc. also shook Wall Street. The combination of all these factors devastated stocks, sending the Dow to a five-year closing low of 7,286.27 on Oct. 9, 2002, nearly 38 percent off its record high close.
Wall Street made its way back slowly, with investors behaving more cautiously and limiting their exposure to risk as they slowly regained faith in stocks. What has also helped is more than four years of sturdy corporate profit growth despite the threat that energy prices and interest rates would hurt consumer spending and companies’ bottom lines.
More recently, the Federal Reserve’s decision to pause after more than two years of interest rate hikes and evidence the economy is moderating, not heading for a hard landing, gave investors the impetus to push the Dow past its high close.
On Thursday, the economic news was mixed. While jobless claims fell, dropping close to economists’ expectations, the Commerce Department revised its gross domestic product number for spring to 2.6 percent from 2.9 percent.
The number of new people signing up for unemployment benefits dropped last week. The Labor Department reported Thursday that new applications filed for unemployment insurance declined by a seasonally adjusted 6,000 to 316,000 for the work week ending Sept. 23. The latest showing on claims was close to economists’ expectations for claims to total around 315,000 last week.
Bonds fell, with the yield on the 10-year Treasury note at 4.62 percent, up from 4.59 percent Thursday. The dollar was higher other major currencies. Gold prices also rose.
Crude oil futures rose. A barrel of light crude was quoted at $63.58, up 62 cents, on the New York Mercantile Exchange.
In corporate news, General Motors Corp. rose 50 cents to $32.78 after dissident shareholder Kirk Kerkorian told GM he is interested in buying up to 12 million more shares of the company as he presses the automaker to enter a three-way alliance with Renault and Nissan.
Hewlett-Packard Co., which is drawing scrutiny from Congress over a corporate spying probe, rose 23 cents to $35.62 after the company announced the resignation of general counsel Ann Baskins.
American Greetings Corp., the nation’s second-largest greeting cards maker, fell $2.54 to $22.50 after swinging to a loss in the second quarter from a year-ago profit, due in part to new marketing and operational initiatives.
Declining issues led advancers 3 to 2 on the New York Stock Exchange, where volume was 765.77 million shares, down from 925.98 million at the same time Wednesday.
The Russell 2000 index of smaller companies fell 3.91, or 0.53 percent, to 728.63.
Overseas, Japan’s Nikkei stock average rose 0.48 percent. Britain’s FTSE 100 rose 0.69 percent, Germany’s DAX index was down 0.01 percent, and France’s CAC-40 gained 0.13 percent.