Dow Jones industrials climb above 25,000 for the first time
NEW YORK (AP) — The Dow Jones industrial average burst through the 25,000 point mark Thursday, just five weeks after its first close above 24,000.
The Dow broke past 1,000-point barriers in 2017 on its way to a 25 percent gain for the year, as an eight-year rally since the Great Recession continued to confound skeptics.
Strong global economic growth and good prospects for higher company earnings have analysts predicting more gains, although the market may not stay as calm as it has been recently.
The Dow has made a rapid trip from 24,000 points on November 30, partly on enthusiasm over passage of the Republican-backed tax package, which could boost company profits this year with across-the-board cuts to corporate taxes.
"For a long while in 2017 I would say the biggest driver was excitement and anticipation over tax reform, but at a certain point I think there was a handover to global economic growth really helping to carry the stock market," said Invesco Chief Global Markets Strategist Kristina Hooper.
Big gains in U.S. blue chip companies have powered the Dow's relentless rise to new heights over the past year, including an 87 percent gain in aerospace giant Boeing, a 70 percent rise in construction equipment maker Caterpillar and a 49 percent increase in Apple.
The Dow, which was founded in 1896 and is the oldest barometer of the U.S. stock market, has nearly quadrupled in value from its low during the financial crisis in early 2009. But the global economy and spending by people and businesses and governments were much slower to recover than stocks were.
"Instead of fiscal stimulus, we relied on monetary policy stimulus, which inflates asset prices as opposed to the overall economy," Hooper said. Stocks have continued to climb as investors saw signs economic growth was finally improving.
Technology companies, which put up some of the biggest gains in the last year, continued to lead the market higher Thursday. Microsoft, JPMorgan Chase and Wells Fargo posted solid gains in late-morning trading. And there was more good economic news Thursday: A report showed private U.S. businesses added 250,000 jobs last month, with smaller businesses adding 94,000. That boosted interest rates and sent banks higher.
The Dow, which tracks 30 big U.S. companies, was up 166 points, or 0.7 percent, to 25,078 as of 3:30 p.m. Eastern Time. The Dow and the other major U.S. indexes all set record highs a day earlier.
The Standard & Poor's 500 index, a much broader index which professional investors prefer to use as their benchmark for large U.S. stocks, rose 13 points, or 0.5 percent, to 2,726.
The Nasdaq composite, which is heavily weighted with technology and biotech companies, added 19 points, or 0.3 percent, to 7,084. The Nasdaq reached a milestone of its own this week, closing above 7,000 points for the first time Tuesday.
Indexes in some developing countries have done even better than those in Europe and the U.S over the past year. Brazil's benchmark Bovespa is up 28 percent over the past year and the Hang Seng index in Hong Kong is up 39 percent.
Bond prices sank, sending yields higher. The yield on the 10-year Treasury note rose to 2.45 percent from 2.44 percent. Higher bond yields are good news for banks because they can charge higher interest rates on mortgages and other kinds of loans.
President Donald Trump said Thursday that the Dow could reach 30,000, which would take another 20-percent jump. Few on Wall Street expect stocks to climb that much any time soon.
For this year, the more optimistic predictions are for a gain about half that big: strategists at Credit Suisse, for example, sees the S&P 500 ending the year at 3,000, which would be a roughly 10 percent gain. At the Wells Fargo Investment Institute, they're expecting a more modest gain, with the S&P 500 ending the year at 2,800 to 2,900. At the low end, that would be just a 2.8 percent rise.
One reason for the more muted expectations is how far stocks have come in recent years. Stock prices usually follow the trend of corporate profits over the long term, but they've been rising more quickly than earnings. Last year, for example, the S&P 500 jumped 19.4 percent. Earnings per share for the companies in the index, though, rose about 10 percent, according to S&P Global Market Intelligence.
That leaves less room for stocks to climb. Even with the corporate tax cuts, few on Wall Street think earnings will rise 20 percent this year. According to FactSet, analysts think earnings for the S&P 500 will grow less than 12 percent this year.
Strategists also see several risks that could derail what's been a remarkably calm ride for markets. Even though the possibilities still seem modest, Wall Street is watching for the potential of inflation ripping higher, which would lead banks to raise interest rates. Central banks are scaling back their efforts to prop up the global economy.
It wasn't all rosy Thursday. Intel continued to stumble after security researchers at Google and a group of academic institutions discovered serious security flaws in its computer processors. It lost 78 cents, or 1.7 percent, to $44.48 after a 3.4 percent decline Wednesday. Intel said it's working to fix the problem and that it's not the only company affected.
Benchmark U.S. crude rose 38 cents to $62.01 a barrel in New York. Brent crude, used to price international oils, added 23 cents to $68.07 a barrel in London.
France's CAC 40 leaped 1.5 percent and so did Germany's DAX. In Britain the FTSE 100 edged 0.3 percent higher. Japan's Nikkei 225 rose 3.3 percent on the first trading day of the year. South Korea's Kospi lost 0.8 percent while Hong Kong's Hang Seng added 0.5 percent.
In other commodities trading, wholesale gasoline rose 1 cent to $1.81 a gallon. Heating oil fell 1 cent to $2.08 a gallon. Natural gas plunged 13 cents, or 4.3 percent, to $2.88 per 1,000 cubic feet.
Gold rose $3.10 to $1,321.60 an ounce and silver remained at $17.27 an ounce. Copper edged up 1 cent to $3.26 a pound.
The dollar rose to 112.74 yen from 112.52 yen. The euro climbed to $1.2072 from $1.2018.
AP Business Writer Stan Choe contributed to this story from New York.