Dow Jones reaches record high, but caution is still urged
The day traders have been waiting for arrived Tuesday, as the Dow Jones broke through its record level and then kept pushing higher, a landmark move that investors hope will help bring mom-and-pop types back to Wall Street.
The Dow opened higher than its previous record for a closing high -- 14,164.53 on Oct. 9, 2007 -- and continued to gain, closing at a new high (without adjusting for inflation) of 14,253.77. That record seems even more impressive when compared with the bottom the Dow hit on March 9, 2009, as a result of the economic crisis: 6,547.05.
"It really does represent an achievement that we have climbed out of this crater," Jack Ablin, chief investment officer at Chicago's BMO Private Bank, told The Wall Street Journal.
Market observers have been expecting Tuesday's record since markets began rising steadily at the beginning of 2013, a trend that has yet to cease more than two months into the year. Investors seem confident that the Federal Reserve's promise to provide capital and keep interest rates low, along with the rebound of the housing market, have set a solid course for the U.S. economy to return to full health despite politicians' worst efforts.
"The economy is still expanding and improving despite the risk of higher taxes and lower spending. While you can never rule out a correction, we don't see the economy or the Fed getting in the way of the market," Jim McDonald, chief investment strategist at Northern Trust Global Investments, told Reuters.
Investors hope the record high will entice retail investors back to the market, putting new money in to help boost prices even more. However, there are still warning signs: Guardian reporter Heidi Moore warns possible investors to pay attention to history, which has shown that record highs are usually followed by large pullbacks.
Moore also notes that the Dow is a blue-chip index that includes 30 companies considered to be traditional powers, so it is not the best indicator of the health of the overall market. The Standard & Poor's 500 is the broad-based index most commonly used to gauge larger trends, and it has been rising at a slower pace but is still at a five-year high and about 2.3 percent lower than its all-time high.
Schaeffer's technical strategist Ryan Detrick agreed with Moore, telling the Journal that a failure on the S&P's part to hit a record would build doubts about the Dow's move.
"I want to see the S&P 500 hit one (a record) pretty quickly, a month or so," he said.
The Nasdaq is the major U.S. index farthest away from a record, thanks to the inflated values of technology companies in the dot-com boom of the late 1990s. The tech-heavy index highest closing total of all time is 5,048.62, established in March of 2000; the index closed more than 35 percent lower than that, at 3,224.13.
Still, Silicon Valley wasn't left out of the party Tuesday: San Jose's largest public employer, Cisco Systems (CSCO), led the Dow's 30 components with a gain of 2.3 percent. On the flip side, the only stock included in the Dow that has not gained since the index hit its low mark in 2009 is Palo Alto tech giant Hewlett-Packard (HPQ), which has declined more than 20 percent in that time.
Apple takes back its crown from Exxon as analyst preaches patience
One of the main factors keeping the S&P away from its record high is its inclusion of another big name in Silicon Valley, Apple. The Cupertino company's weak performance in 2013 is a major factor in the S&P trailing the Dow, but it bucked that trend Tuesday and regained its title as the most valuable company in the United States.
After another poor showing on Monday cost Apple its crown, the stock gained 2.6 percent Tuesday to claw back above a $400 billion market capitalization, at $404.9 billion. Its main competitor, Exxon Mobil, gained at a slower clip, giving it a slightly lower market cap of $403.4 billion; it is the second time Exxon eclipsed Apple this year, and the second time it took Apple only one day to snag the throne back.
Still, Apple stands out more for its losses in 2013 than Tuesday's gains, with MarketWatch pointing out Tuesday that it is the only stock in the S&P 500 with a market cap higher than $200 billion to be down on the year so far. In a note Tuesday, UBS analyst Steven Milunovich -- who has a "Buy" rating on the stock with a price target of $600 -- said that Apple will have to offer a new form factor for its iPhone or iPad to see immediate positive stock movement.
"The only way out might be innovation in new categories, which will require investor patience," Milunovich wrote.
The latest Apple rumors did not mention a radical change for the company's popular consumer gadgets: A report said that Apple will launch an iPhone 5S in August, with a better camera the main selling point.
Google, Intuit and Adobe follow Dow to new highs, social stocks fall
The SV150 index of Silicon Valley's largest technology companies is far from a record, like the Nasdaq, but still performed better than the major U.S. indexes Tuesday as several notable companies reached record highs on the tails of the Dow.
Google hit a record high for the second consecutive day and 19th session so far this year, ending the day with a 2.1 percent increase at $838.60, the highest individual-share price in the S&P 500. The Mountain View search giant received its third price target of at least $1,000 as Fortune reported that it will introduce a YouTube-branded streaming-music service.
Another Mountain View firm, software company Intuit (INTU), also established an all-time high Tuesday, advancing 2.4 percent to close at $67.88, and San Jose software company Adobe Systems (ADBE) hit its highest price since 2008 and closed with a 2.5 percent gain at $41.46.
HP gained 2 percent on the day despite more calls for shareholders to boot board members, and Palo Alto electric car company Tesla Motors (TSLA) increased 3 percent despite losing a libel suit against British television show Top Gear.
One sector that was left out of Tuesday's party was social networking, with LinkedIn failing to add to its recent records with a 1.1 percent decrease, Facebook declining in the run-up to this week's News Feed event, and Zynga falling 2.8 percent. EBay (EBAY) also declined, losing 0.4 percent as a survey showed consumers aren't that interested in same-day delivery, a service the San Jose company recently expanded.
Silicon Valley tech stocks
Up: Ruckus, Workday, Tesla, Jive, Apple, Gilead, Adobe, Intuit, Cisco, Google, HP, VMware, SolarCity, Electronic Arts (ERTS), NetApp, Palo Alto Networks, Applied Materials, Advanced Micro Devices, Oracle (ORCL), Nvidia, Intel (INTC), Yahoo (YHOO), Symantec
Down: Zynga, LinkedIn, Juniper, Facebook, Yelp, eBay, Splunk
The tech-heavy Nasdaq composite index: Up 42.1, or 1.32 percent, to 3,224.13
The blue chip Dow Jones industrial average: Up 125.95, or 0.89 percent, to 14,253.77
And the widely watched Standard & Poor's 500 index: Up 14.59, or 0.96 percent, to 1,539.79
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.