Dow closes over 12,000 for first time
The Dow Jones industrial average yesterday closed above the 12,000 level for the first time, buoyed by strong corporate earnings and adding to the stock market's recent record-setting rally.
The Dow rose 19.05 points to finish at 12,011.73, crossing the milestone about two weeks after surpassing the record close of Jan. 14, 2000, set at the height of the tech boom. The Dow broke the 11,000 mark for the first time in May 1999.
Broader indexes also advanced yesterday. The Standard & Poor's index of 500 leading companies rose one point to 1,366.96. The technology heavy Nasdaq Composite index rose 3.79 points to 2,340.94
Although it's the best-known stock benchmark, the Dow industrials represent a narrow segment of the market, just 30 leading companies known as ``blue chips." Analysts said breaking the 12,000 barrier won't have a big impact on individual portfolios, but nonetheless indicates the US economy remains solid.
Strong earnings from leading companies such as Coca-Cola Co., United Parcel Service Inc., and Apple Computer Inc. helped propel the Dow yesterday, analysts said. But in recent months, the rally has been underpinned by falling energy prices, stable interest rates, and growing confidence the US economy will skirt a recession and continue to grow moderately.
``Going over 12,000 does not mean life is a bowl of cherries," said Al Goldman, chief market strategist for A.G. Edwards & Sons Inc. of St. Louis. ``But we still have a pretty good economy and good earnings."
The rally began at the end of the summer, spurred by falling oil prices, now about 25 percent below the summer's record levels, and the Federal Reserve's decision to end a two-year campaign of raising short-term interest rates. It gained momentum as recent data showed the economy and employment still growing, but at a slower pace with inflation under control.
John Bitner, chief economist at Eastern Investment Advisors, a unit of Eastern Bank of Boston, said falling energy prices have been the key to the rally. The decline in gasoline and oil prices is putting more money into consumers' pockets, providing a boost to an economy in which consumer spending accounts for more than two-thirds of activity.
In addition, Bitner said, lower oil prices mean less inflation.
Inflation worries had been a drag on financial markets, since accelerating inflation can undermine corporate profits and push the Federal Reserve to raise interest rates, increasing the risk of recession. On Wednesday, stocks received a boost when the Labor Department reported consumer prices fell a half-percent in September, and the annual inflation rate moderated to about 2.1 percent. The Dow closed just below 12,000 on Wednesday.
The Fed is widely expected to hold its benchmark interest rate steady at 5.25 percent when policy makers meet next week.
Meanwhile, corporations are posting strong profits, with reported earnings this quarter so far growing more than expected, according to Thomson First Call, the research firm that surveys market analysts and tracks earnings. All told, aggregate earnings of S&P 500 companies are expected to increase about 15 percent this quarter from a year ago. It would be the 13th consecutive quarter of double-digit profit growth, Thomson said.
The economy, of course, still faces risks, including instability in oil-producing regions that would send energy prices soaring and a slowing housing market.
For the time being, said Tony Proctor, president of the Wellesley investment firm Proctor Financial Inc., investors seem to believe the economy is on solid footing. Still, he added, investors shouldn't get too excited about the Dow.
``Celebrate, do a little dance," Proctor said, ``but go back to work."
Robert Gavin can be reached at rgavin@globe.com. 
