Why the Dow Is Still Rising After Yesterday's High
I don't know if you've heard, but the Dow Jones Industrial Average reached its all-time nominal high yesterday, closing at 14,253. Before you get too excited, however, there are two ways to look at this.
First, and most ominously, the last time the blue-chip index visited such lofty territory was back in October of 2007 -- that is, just before the financial crisis got into full swing. That said, I don't prescribe to the belief that we're on the verge of another cataclysmic shock.
Second, and more optimistically, one could take the new record as a sign that the Dow's lost decade is finally over. As my colleague Travis Hoium noted yesterday:
There's no doubt this has been the most stressful time to be an investor in my lifetime. We haven't seen financial and economic devastation quite like this since the Great Depression, but the U.S. economy has been amazingly resilient. The job isn't done; unemployment is too high, the national debt is too great, and economic growth is still pretty anemic. But the Dow clearing a record high is one more psychological hurdle on our way to a recovery.
Either way, the blue-chip index is continuing its rally today. With roughly an hour left in the trading session, the Dow is up by 58 points, or 0.4%.
Today's renewed ascent stems largely from two upbeat economic reports. This morning, payroll-processing company Automatic Data Processing said the private sector added 198,000 jobs last month. The median forecast of economists surveyed by Bloomberg had expected an advance of 170,000. A separate report by the Institute for Supply Management showed that factory orders declined by 2% in January, similarly coming in better than expected.
In terms of individual Dow stocks, shares of Hewlett-Packard are leading the index higher, up by 3.6% in afternoon trading. While this is the second day in a row the tech giant has raced ahead of the other components, it's worth noting that this outperformance owes to the stock's precipitous drop over the last two years. As fellow Fool Dan Carroll put it earlier:
Take care if you're tempted, however: Analysts still expect the PC market to decline in 2013, and HP still has a long road back to respectability ahead of it. Until this company can establish a competitive long-term plan, I'd avoid this volatile stock.
Conversely, the worst-performing stock on the index is Microsoft , down 0.7% at the time of writing. It was announced this morning that European regulators have fined the software giant $732 million for failing to offer Windows users a choice of Web browsers, as it had previously promised. According to The Wall Street Journal, this marks the first time that a company has broken a voluntary agreement with regulators across the pond.
How much higher will the Dow go?
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John Maxfield has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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