News Column

Dow tops 17,000 on strong jobs report

July 4, 2014

By Jim Gallagher, St. Louis Post-Dispatch

July 04--The Dow Jones industrial average broke through the 17,000 mark on Thursday -- hitting a record high -- propelled by a powerful burst of hiring in America.

Stock traders celebrated the news that the nation added 288,000 jobs last month, far more than forecast. The unemployment rate fell to 6.1 percent in June, down from 6.3 percent in May, the Labor Department said.

It was the fifth straight monthly gain above 200,000 -- the best such stretch since the late 1990s tech boom.

The Dow ended the day at 17,068, up 92 points for a 0.54 percent gain. The Standard & Poor's 500 gained 0.55 percent and the Nasdaq rose 0.63 percent.

The head of the European Central Bank added to investors' glee by saying he will keep interest rates down in the 18-nation eurozone. The Euro STOXX Index gained 1.15 percent.

"Stocks just seem to be moving up and up, but for nice reasons. People have jobs," said Clayton money manager Charles Rice. "If you're considering selling, notice that you're standing in front of a rocket ship."

Thursday's gains add to a strong month-and-a-half for Wall Street. The S&P 500 index is approaching its own milestone of 2,000. The big-company stock index closed Friday at 1,985, up 11.

The indices have risen as a steady stream of good news on jobs and business growth bolsters investor confidence.

The Institute for Supply Management reported Thursday that service industries expanded in May at the second-fastest pace in almost a year. Traders also took comfort in remarks from Federal Reserve Chair Janet Yellen, who indicated she would be reluctant to use her monetary weapons to pop bubbles in financial markets.

Health care and telecom stocks were the best performing sectors Thursday, noted Wells Fargo Advisors. Utilities were down the most, with a utilities index falling more than 1.9 percent.

Ameren stock lost 1.43 percent, closing just as the company announced a request for a $264 million increase in customer electric rates.

The bond market snoozed through the stock investors' party Thursday as the yield on the 10-year Treasury barely budged at 2.64 percent.

The Dow Industrials are up 3 percent for the year, and the S&P 500 is up 7.4 percent, after last year's 29 percent gain. Some analysts beginning to worry that stocks have come too far, too fast.

"We are in rarefied valuation territory," said David Rolfe, chief investment officer at Wedgewood Partners in Ladue. "It's shades of 1987, shades of 1999," he said, naming periods just before bear markets.

Stocks have now gone more than 1,000 days without a correction -- defined as a 10 percent decline -- the longest stretch since 1928. At this point, bad news could send the market down quickly, Rolfe said. "The first whisper that there's smoke in the lobby and the speculators are going to run for the exit," he said.

The S&P 500 is now selling at a price 18 times trailing earnings, above the longtime average of about 16. Still, investors are expecting strong earnings as companies this month report results for the June quarter. Profits could be up 11 percent from a year earlier, according to an estimate from S&P Dow Jones Indices.

"The market is resting on some pretty aggressive earnings forecasts," said Bill O'Grady, chief market strategist at Confluence Investment Management in Webster Groves.

Others are more optimistic. "Favorable fundamentals and attractive valuations, in our opinion, continue to carry the major indices higher," wrote Stuart Freeman and Scott Wren, stock strategists at Wells Fargo Advisors, in a note to clients. "Today, capacity utilization is not tight and inflation rates are modest. These are good signs for the broad equity indices."

The Dow's 17,000 milestone is another reminder of its bull market run. The index has climbed more than 10,500 points since its Great Recession low of 6,547.05 on March 9, 2009.

Among individual stocks, the pet supply chain PetSmart rose the most in the S&P 500 on Thursday. PetSmart gained $7.48, or 13 percent, to $67.28 after the activist investor firm Jana Partners disclosed a 9.9 percent stake in the company.

Thursday was the slowest trading day of the year for stocks. Roughly 1.9 billion shares changed hands on the New York Stock Exchange. U.S. markets will be closed today for the Fourth of July holiday. U.S. stock trading will reopen Monday.


The Associated Press contributed to this report.


Jim Gallagher is a reporter at the Post-Dispatch


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Source: St. Louis Post-Dispatch (MO)

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