Dow Breaks 11,000 for First Time Since 2001

The Dow Jones Industrial Average closed Monday above the 11,000 mark for the first time since 2001. Some economists warn that early peak may not signal the market's aptitude for the coming year.

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STEVE INSKEEP, host:

Business news starts with some improvement in the stock market.

The market reached a milestone yesterday. The Dow Jones industrial average passed the 11,000 mark for the first time since 2001. NPR's Adam Davidson has been asking some analysts how much this matters.

ADAM DAVIDSON reporting:

Economy.com's Mark Zandi says the Dow has told us one thing quite clearly.

Mr. MARK ZANDI (Economy.com): Businesses are in fantastic shape.

DAVIDSON: Not so quick, cautions Richard Sylla, an economics professor at NYU's Stern School of Business. He says the Dow hitting 11,000 doesn't mean anything.

Professor RICHARD SYLLA (Stern School of Business, NYU): It's a round number, it's easy to remember, but it's not something that most professionals take very seriously.

DAVIDSON: Sylla points out that the Dow has been above 11,000 before. In fact, six years ago today the Dow hit its all-time record, 11,722. Sylla says this is no big deal.

Prof. SYLLA: Something exciting would be for the Dow or the S&P to surpass the early 2000 peaks, and we're still a ways from that.

DAVIDSON: Zandi says that Sylla might be selling the current market short. After all, the previous peak came at the end of a stock bubble frenzy.

Mr. ZANDI: I think back in 2000, the market was all juiced up. There was speculative fervor, particularly in technology stocks. And the stock market did not reflect underlying economic fundamentals.

DAVIDSON: These days, says Zandi, stock prices are on far more solid ground, so the Dow's 11,000 today is actually worth more than back when the market was running on irrational exuberance. Interestingly, the Dow went up yesterday not because of some hot new Internet start-up, but on good news from three old and venerable US corporations, General Motors, JP Morgan Chase and Merrill Lynch. According to Zandi, many older firms learned a lot during the post-bubble downturn and have instituted many positive changes.

Mr. ZANDI: And now they're set to grow and we should see stronger growth going forward, which means investment and most importantly for most of us, it means more jobs.

DAVIDSON: In short, Zandi says, last time the Dow reached 11,000 right before a painful economic downturn. This time it looks like it's coming at the beginning of what could be a very good year. Adam Davidson, NPR News, New York.

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