Buoyed By Greek Bailout, DOW Hits Milestone
MELISSA BLOCK, HOST:
It's been a while since we've said these two things together: the Dow Jones Industrial Average and 13,000. The Dow hit that mark today for the first time in nearly four years. It fell back below 13,000 before the close.
Recently, the market has been on an upward swing, as we hear from Ilya Marritz of member station WNYC.
ILYA MARRITZ, BYLINE: The last time the Dow closed above 13,000, Lehman Brothers was still in business, unemployment was at five and a half percent and Barack Obama hadn't yet clinched the Democratic nomination for president.
Doreen Mogavero, a trader at the New York Stock Exchange, remembers May 2008 as the moment when the economy was just starting to tank.
DOREEN MOGAVERO: We were going in the wrong direction.
MARRITZ: Almost four years and one financial crisis later, Mogavero says 13,000 means something different. The stock market is now climbing out of a trough.
MOGAVERO: Sentiment certainly has changed, I think, in great part because expectations have changed.
MARRITZ: Investors, she says, once hoped for a quick rebound from the recession. That didn't happen and now they're adjusting to a different set of facts. While unemployment remains high, jobless claims have declined, consumer confidence is up, if only a little bit.
MOGAVERO: People in general are starting to realize that this recovery is going to take a very long time, and as you become more comfortable with the facts like that you become more comfortable investing in the market.
MARRITZ: We spoke at 1:00 p.m. Eastern time and the Dow had already topped 13,000. Mogavero says a cheer went out across the floor, then the index edged lower.
Hugh Johnson, chief economist with Hugh Johnson Advisors, says an absence of really bad news is just as responsible for the rally as the drip, drip, drip of OK, kind of, sort of good news.
HUGH JOHNSON: You know, we don't have bad news coming out of Japan in the form of earthquakes and tsunamis. We don't have real bad news. We've got some, but not real bad news coming out of the Middle East in the form of higher oil prices. That's a little bit troubling, but not as alarming as it was.
MARRITZ: Those events, plus gridlock in Washington and the eurozone crisis, helped kill a market rally in early 2011. Johnson says Congress' recent decision to extend the payroll tax holiday cheered investors and they really feel reassured by the European Central Bank's decision, taken quietly last year, to pump liquidity into troubled European banks.
Can the rally continue? Peter Morrissey is professor of business at the University of Maryland and a forecaster. He says stock market gains will be hollow unless they're accompanied by a growing economy. For too long, corporate profits have been the result of cost cutting, not sales growth.
PETER MORRISSEY: Businesses must grow their top line sales. To do that, we need more reasonable growth than we had in 2011. Three percent would be enough.
MARRITZ: We'll get a good clue when preliminary first quarter GDP figures come out in late April. For NPR News, I'm Ilya Marritz in New York.
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