Dow Pushes Past 14,000 Twice Before Retreating

By Tomoeh Murakami Tse and Howard Schneider
Washington Post Staff Writers
Wednesday, July 18, 2007

NEW YORK, July 17 -- The Dow Jones industrial average of blue-chip stocks broke the 14,000 mark for the first time Tuesday after a favorable report on inflation and strong corporate profits lifted stocks.

The Dow, which rose as high as 14,021.95, retreated in late trading to close at 13971.55, up 20.57, or 0.1 percent.

The Standard & Poor's 500-stock index, a broader market measure, closed at 1549.37, down 0.15. The tech-heavy Nasdaq composite index closed at 2712.29, up 14.96, or 0.6 percent.

It was the fifth consecutive day of gains for the Dow, which was up 470 points from a week ago. The rally came as investors put aside concerns, at least for now, about weakness in the housing and mortgage markets to focus on quarterly earnings reports from big companies.

Merrill Lynch, Johnson & Johnson and Coca-Cola reported earnings that beat analysts' expectations. After the markets closed, Intel posted a 44 percent increase in profit.

Earnings rose 31 percent at Merrill Lynch, 9 percent at Johnson & Johnson and 1 percent at Coca-Cola, whose results beat Wall Street estimates despite a slump in soda sales and restructuring costs.

David Dietze, chief investment strategist at Point View Financial Services in Summit, N.J., said investors think analysts' "forecasts may be too low . . . and they're placing bets to take advantage of it."

A report on inflation was also in the spotlight Tuesday. The federal government released figures on wholesale inflation that were lower than expected, but results were mixed on core inflation, which excludes volatile prices for food and energy.

Wholesale prices fell 0.2 percent in June, led by a 3.9 percent drop in gasoline and an overall decline in energy costs, the Labor Department said. The core inflation figure increased by 0.3 percent, more than in May and likely to keep inflation at the forefront of Federal Reserve discussions about interest rates.

The overall tame results helped set the stage for the Dow to break through its latest millenary. The market indicator briefly crossed 14,000 Tuesday morning before falling back. At about 2 p.m., it pushed past 14,000 again, only to retreat in the final half-hour of the session as traders took profits.

Also pushing stocks higher Tuesday were corporate deals. Basell Holdings, a Dutch chemical company, said it would buy Lyondell Chemical in Houston for $12.7 billion, or $48 a share. Lyondell closed at $47.05, up $6.93, or 17 percent.

Money managers said the market's climb, despite investors' jitters, is being helped by a weak dollar, a strong global economy and the relative attractiveness of stocks compared with other assets. Multinational corporations, such as the 30 companies that make up the Dow, often draw a significant portion of their revenue from abroad and would benefit from the strong global economy despite a slowdown in the United States, the managers said.

Rising bond yields, which caused an equities sell-off last month, have been mostly stable in recent days. The yield on the 10-year Treasury note was 5.06 percent Tuesday, compared with 5.04 percent Monday.


Rohm & Haas rose $5.54, to $61.27. The paintmaker plans to repurchase $2 billion in stock.

Nautilus fell $2.04, to $9.90. Second-quarter earnings were weak for the fitness-equipment maker, and an analyst said results might not improve the rest of the year.

Stanley Furniture fell $2.57, to $19.16. The furniture maker reported weak second-quarter earnings and reduced its forecast amid a weak housing market.

© 2007 The Washington Post Company