For 1st time, Dow index ends session over 23,000

Peter Tuchman, a trader on the floor of the New York Stock Exchange, celebrates Wednesday as the Dow Jones industrial average hits a new high.
Peter Tuchman, a trader on the floor of the New York Stock Exchange, celebrates Wednesday as the Dow Jones industrial average hits a new high.

A day of modest gains on Wall Street resulted in more milestones for U.S. stocks Wednesday as the Dow Jones industrial average closed above 23,000 points for the first time.

The Standard & Poor's 500 index and Nasdaq composite also finished at record highs.

Technology stocks and financial companies led the gainers as investors weighed the latest batch of company earnings. Strong quarterly results drove IBM shares to their biggest one-day gain since 2009. Those gains accounted for much of the 30-company Dow's record high.

"For us, it's just another indication that it is a strong market here, year-to-date," said Paul Springmeyer, investment managing director for US Bank Private Wealth Management. "To have the Dow up over 17 percent is a very, very strong year."

All told, the Dow picked up 160.16 points, or 0.7 percent, to 23,157.60. The S&P 500 index rose 1.90 points, or 0.1 percent, to 2,561.26. The Nasdaq added 0.56 point, or 0.01 percent, to 6,624.22. The Russell 2000 index of smaller-company stocks gained 7.65 points, or 0.5 percent, to 1,505.14.

The S&P 500 and Dow also set records on Monday and Tuesday.

The Dow closed above 22,000 for the first time on Aug. 2, and since then the best-performing components have been Boeing, Caterpillar, Goldman, Home Depot and 3M. The Dow is up 3,395 points this year, or 17.2 percent.

It's the sixth 1,000-point milestone reached by the Dow in the past 12 months and the fifth since Donald Trump was elected president in November.

Round-number milestones are routinely dismissed by the professional investors. But it's a sign the bull market just keeps chugging along and investors don't want to miss out, said Howard Silverblatt, senior index analyst at S&P Global.

"If I'm on the side, does that push me to get in?" he said. "Psychologically do I look at that and say 'I'm missing out on this market, I'm sitting on the sidelines."'

As the numbers get higher, the proportions get smaller: The trip from 22,000 to 23,000 was 4.5 percent compared with 8.3 percent from 12,000 to 13,000. It's still impressive, Silverblatt said.

"Yes, each 1,000 gets less of a percentage, but the bottom line is look how quick we're doing it," he said.

Despite the market's recent string of record highs and the Dow's latest milestone, stocks can still grind higher as long as the economy continues to expand and companies grow revenue, said Quincy Krosby, chief market strategist at Prudential Financial.

"Overall, the underpinning for the market is solid," Krosby said. "You have global growth picking up the way it has over the last quarter, it's an indication that demand is picking up as well and it's why you have global markets doing well."

It's been nearly 16 months since S&P 500 index funds had a pullback of even 5 percent over the course of days or weeks, the longest such streak in two decades.

But as investors learned so painfully 30 years ago, markets can shift quickly. On Oct. 19, 1987, the S&P 500 fell 20.5 percent to wipe out what had been sizable gains for the year.

Virtually no one is predicting a repeat of "Black Monday," which was the stock market's worst day in history and happened when conditions were different from today. But several worries are circulating underneath the market's placid surface. While they may not cause a 20 percent drop in one day, they could be the spark for the market's next drop of 5 percent or more.

For starters, stocks are expensive. Stock prices tend to follow the trend of corporate profits over the long term, but stocks have been rising more quickly than earnings recently.

The S&P 500 is trading at 31 times its average earnings over the past 10 years, after adjusting for inflation, according to data compiled by Yale economist Robert Shiller. That's the highest level since the summer of 2001, when the dot-com bubble was deflating.

The Federal Reserve's long-term strategy to increase interest rates is also of concern to traders. The Fed cut short-term interest rates to near zero in response to the 2008 financial crisis. It also took the unprecedented step of purchasing trillions of dollars of bonds to keep rates low. Those low rates meant bonds were paying little in interest, and investors moved into stocks in search of greater returns.

Now the Fed is slowly pulling back. This month it started paring its $4.5 trillion in bond investments. And many investors expect the central bank to raise short-term interest rates at its meeting in December, which would be the third increase this year.

In Washington, Trump's tax-overhaul plan could fail, and North Korea and other hot spots around the world remain big unknowns.

"There are a lot of dangerous things going on," said John Vail, chief global strategist at Nikko Asset Management. Besides the worsening war of words between North Korea and the United States, he listed Ukraine and Syria as other areas with the capability of drawing the world's big powers into conflict.

So far, investors have shrugged off such worries. On Wednesday, they continued to size up the latest raft of company earnings.

IBM jumped 8.9 percent after the technology and consulting company delivered strong quarterly results. The gain was the biggest one-day jump for IBM since January 2009. Even so, the stock remains down 3.9 percent for the year.

IBM's gain was responsible for 89 points of the Dow's increase. Gains by Goldman Sachs accounted for another 40 points of the 30-company average's climb.

Financial stocks led the gainers Wednesday. Goldman Sachs shares rose $5.94, or 2.5 percent, to $242.03. Insurer Assurant climbed $5.94, or 6.2 percent, to $101.80.

Northern Trust shares rose 3.8 percent after the bank's earnings and revenue beat analysts' estimates. The bank also said it plans to cut $250 million in annual spending by 2020. The stock added $3.48 to $94.58.

Investors also sized up corporate deals and other developments making the news Wednesday.

Anthem, the second-largest U.S. health insurer, rose 2.4 percent after announcing that it's entered a prescription benefits management deal with CVS. Anthem shares rose $4.53 to $191.79. CVS rose $1.47, or 2 percent, to $74.10.

The Nielsen company climbed 4.2 percent after the longtime tracker of TV viewership said it now has a way to collect details on the number of people who watch programs on streaming video services such as Netflix and Amazon. Nielsen said eight television networks and studios, including ABC and NBC, have already subscribed to its new service. The stock rose $1.69 to $41.69.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.34 percent from 2.30 percent late Tuesday.

Oil prices recovered from an early slide. Benchmark U.S. crude rose 16 cents to settle at $52.04 a barrel in New York. Brent crude, used to price international oils, gained 27 cents to close at $58.15 a barrel in London.

Shares in drilling and oil production companies declined, part of a steep slide in energy stocks. Range Resources slid 45 cents, or 2.3 percent, to $19.

Gold fell $3.20 to $1,283 an ounce. Silver slid 4 cents to $17 an ounce. Copper lost 2 cents to $3.18 a pound.

Information for this article was contributed by Alex Veiga and Stan Choe of The Associated Press and by Sarah Ponczek of Bloomberg News.

A Section on 10/19/2017

Upcoming Events