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Dow closes above 12,000 for first time since 2008 as stocks jump

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Jan. 31 (Bloomberg) -- Adam Parker, head of U.S. equity strategy at Morgan Stanley, discusses the outlook for U.S. stocks and investment strategy. Parker speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)

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Washington Post Staff Writers
Tuesday, February 1, 2011; 8:38 PM

The Dow Jones industrial average closed above 12,000 Tuesday for the first time since June 2008. The milestone was another mark of recovery from one of the worst financial crises in the nation's history - and a sign that investors expect the economy to keep growing instead of taking a second dip into recession.

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Propelled by strong corporate earnings, the Dow rose 148.23 points to close at 12,040.16, despite the political upheaval in Egypt, which sent stock prices tumbling just days ago. Investors seemed to have shaken off fears that instability could spread through the Middle East, threatening the flow of oil.

The news raised hopes on the economic front. "We have issues; we have problems," said James W. Paulsen, chief investment strategist at Wells Capital Management, an arm of Wells Fargo. "But I don't think they're as overwhelming as what everyone thought, and that's why we're back here as fast as we are."

The Dow, an index of major corporate share prices, has now risen 84 percent in less than two years, from a trough of 6,547.05 in March 2009. But it is still below its pre-crisis peak of 14,164.53 in October 2007.

The Standard and Poor's 500-stock index, a broader market gauge, ended the day at 1,307.59, closing above 1300 for the first time since August 2008.

Tuesday's gains were driven in part by a surprisingly strong report on U.S. manufacturing. Activity at the nation's factories grew at its fastest pace since 2004, according to the Institute for Supply Management's survey of manufacturers.

Events in Egypt might have turned into a plus for U.S. stocks. Trouble overseas is making the U.S. stock market seem more attractive and, because the protests have been relatively peaceful, fears of major disruptions have ebbed over the past two days.

"Certainly we've had a lot to worry about in the rest of the world recently, first in Europe and now in the Middle East," said Perry Piazza, chief investment strategist at Contango Capital Advisors. "When that happens, it looks really safe and smart to invest in U.S. equities, especially blue chips."

Companies such as UPS, IBM, Apple, Netflix and Caterpillar have contributed to the recent momentum with encouraging year-end reports or upbeat financial forecasts.

Though reviews are mixed on the Federal Reserve's effort to jump-start the economic recovery by purchasing $600 billion in Treasury bonds, some give the Fed credit for printing money to keep the economy from backsliding.

Meanwhile, corporations are sitting on piles of cash, and expectations are rising that they will spend it, either to buy other companies or to invest in equipment.

But stocks are only one facet of the economy, and the situation remains bleak for housing and jobs. The real estate market has yet to rebound significantly from a catastrophic collapse, and an unexpectedly large jump in jobless claims last week reinforced the threat of persistently high unemployment.


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