Stocks rally: Dow closes at highest mark since late 2007
NEW YORK -- The Dow Jones industrial average continued its long road back from the depths of the financial crisis on Tuesday, catapulting to a new bull market high and its best close since December 2007.
The Dow was turbocharged by a better-than-expected April reading on U.S. manufacturing — its best level in 10 months — which allayed fears that the economy was in danger of rolling over after manufacturing surveys in the New York, Philadelphia and Chicago regions weakened in April.
The Dow rallied 65.69 points to 13,279.32, topping its April 2 peak and posting its highest close since Dec. 28, 2007.
A look back four years ago illustrates just how far the Dow has come since hitting a bear market low of 6547.05 in March 2009.
In December 2007, George W. Bush was still president. The 18-month-long recession was just beginning. And the Federal Reserve was in the early stages of slashing short-term interest rates to roughly 0% to help stimulate the economy; on Dec. 11, 2007, the Fed cut rates to 4.25%.
What's more, onetime Wall Street titan Lehman Bros. was still in business and not a symbol of reckless risk-taking on Wall Street. Other victims of the financial crisis — insurer American International Group, banking giant Citigroup and auto icon General Motors— were still members of the Dow.
"It's remarkable that we have rallied back as much as we have given all the headwinds we had to face," says Jack Ablin, chief investment officer at Harris Private Bank. The main headwinds are the fallout from the Great Recession at home and angst caused by Europe's ongoing debt crisis.
Bruce Bittles, chief investment strategist at Robert W. Baird, says the upbeat manufacturing report caught investors by surprise, as they had been pricing in a slower recovery into stock prices. Says Bittles: "I'm not saying one report entirely dispels the notion that the economy is faltering, but for today it was a big influence."
Stocks have also gotten a lift from Corporate America's strong profit-reporting season.
In a note of caution, Bittles says that the Dow's new bull market high came on the first day of May, the start of what historically has been the worst six-month period for stocks and the impetus for the trading strategy: "Sell in May and go away."
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