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The Dow has passed a new milestone. The Industrial Average finished above 14,000 for the first time, just barely. It was up 82 points at the close at 14,000.41. The market has been on a tear lately, climbing a thousand points over the last 60 days of trading. At the same time, U.S. economic growth has slowed. And a lot of people are worried about the housing market.
As NPR's Jim Zarroli reports, it is the thriving global economy that's helping American companies do so well.
JIM ZARROLI: The fact that the Dow has now finished over 14,000 may be a milestone in the market's history. But David Bianco, the chief equity strategist at UBS, says it's only one of many that the stock market has experienced lately.
Mr. DAVID BIANCO (Chief Equity Strategist, UBS): For the past two years, the total return in the S&P 500 or the Dow has been about 35 percent. So being in large-cap equities, globally, it's been great and even in the U.S. has been a good investment.
ZARROLI: The U.S. stock market keeps racing along for several reasons. One is the fact that so many companies now buy back their own stock, which tends to drive up the price. Another is the surge in private equity deals. But Bianco says one of the biggest reasons is the stunning growth overseas. When Japan is excluded, Asia is now growing by 7 percent a year. Europe is doing better. And all that is fueling a commodity-driven boom in Africa, the Middle East and Latin America.
Mr. BIANCO: We've got a global economy that's feeding upon itself. And that's a powerful phenomenon that we think will last for many years.
ZARROLI: Bianco says as a result, U.S. companies are doing more and more of their business overseas. Take United Technologies Corporation or UTC. It makes lots of high-tech products like helicopters and aircraft engines and elevators. Vice president of finance Jim Geisler says the boom in much of the developing world has been great for his company's bottom line.
Mr. JIM GEISLER (Vice President of Finance, United Technologies Corporation): As people move out of subsistence into a higher standard of living, they acquire products like ours. And so for us, that is the growth market, outside the States.
ZARROLI: Geisler says the only real weak spot for UTC right now is the sale of heating and air conditioning products in North America, which have been hurt by the housing slowdown.
Mr. GEISLER: Non-U.S. markets or global markets account for 60 percent of the total sales of UTC. And that's quite a change from back in the early '70s, where we were over 90 percent domestic sales company.
ZARROLI: The same shift has been seen at a number of other companies. McDonald's - which is like UTC, a Dow 30 company - says its same-store sales rose 5 percent in the United States during the second quarter. They rose nearly 11 percent in Asia and the Middle East.
(Soundbite of 3M ad in Taiwan)
ZARROLI: More and more U.S. companies like 3M are aiming their marketing efforts overseas, at countries like Taiwan.
(Soundbite of 3M ad in Taiwan)
ZARROLI: And as U.S. companies look for more of their revenue abroad, they're less vulnerable to shifts in the American economy, which means their stock price isn't hurt as much when growth slows.
David Wyss is chief economist at Standard and Poor's.
Mr. DAVID WYSS (Chief Economist, Standard and Poor's): We have to realize that the stock market is no longer as closely tied to the United States as it used to be. Almost half of the revenue of the non-financial companies in the S&P 500 now comes from outside the United States. In the rest of the world, the economies are doing great.
ZARROLI: And Wyss says that when companies get more revenue overseas, they're also able to weather slumps in the dollar, like the one taking place right now. To be sure a weaker dollar also brings problems, it can make commodity prices higher and fuel inflation, for instance. But for stock investors, the boom abroad more than offsets any risks to the economy in this country.
Jim Zarroli, NPR News, New York.
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