Dow Closes Above 14,000

Earnings Reports, Mergers Sustain Long Market Rally

NEW YORK, July 19 -- The Dow Jones industrial average closed above 14,000 for the first time Thursday, having climbed 1,000 points in three months as strong corporate earnings overpowered fallout from the deteriorating housing market.

U.S. stocks had been gaining steadily since last Thursday on corporate merger activity and solid earnings reports, while investors fought off concerns about inflation and growing evidence that troubles in the mortgage industry were worse than originally thought.

On Tuesday, the Dow reached the 14,000 level but slipped in late trading. Stocks took a hit on Wednesday after Bear Stearns told investors in two of its hedge funds that their holdings had been reduced, at best, to pennies on the dollar. The funds included bonds backed by mortgage loans to high-risk borrowers.

But investors refocused on good earnings news and stocks recovered Thursday. At the close, the Dow stood at 14,000.41, up 82.19 points, or 0.6 percent, from the previous session.

The Dow, which measures 30 blue-chip stocks, hit 13,000 just 12 weeks ago. It crossed 12,000 in October.

The Standard and Poor's 500-stock index also reached a record high Thursday, rising 6.91 points, or 0.5 percent, to 1553.08. The Nasdaq composite index rose 20.55 points, or 0.8 percent, to 2720.04.

While the Dow is up 12.3 percent for the year, the S&P, a broader market measure, is up 8.7percent. The Nasdaq is up 12.6 percent, although far from its peak of 5049 during the dot-com boom in 2000.

Market analysts said U.S. stocks were in the classic position of "climbing a wall of worry."

"Everyone is worried about everything, and that means they're sitting with a boatload of buying power on the sidelines," said James W. Paulsen, chief investment officer of Wells Capital Management. "Every time it doesn't get quite as bad as they thought, they're kind of enticed back in. . . . There's constant chronic negative sentiment. But that's a positive for the market."

Paulsen and other money managers also noted that market and economic conditions were largely healthy. The economy, while slowing, is growing despite the housing slump. Unemployment remains low.

Corporate earnings, while also slowing, have come in above Wall Street expectations. Strong global economic growth and a weak dollar have boosted the bottom line for large companies with overseas operations.

On Thursday, IBM reported better-than-expected second quarter results. Profit rose 12 percent from the comparable quarter last year, helped by strong sales from the company's global services division. IBM shares rose 4.3 percent. Honeywell International said its earnings rose 17.3 percent, also beating Wall Street estimates. Both companies are components of the Dow.