Barclays trading desk on Wall Street. (Photo: REUTERS)
The Dow Jones Industrial Average closed above 18000 for the first time Tuesday after data showed the U.S. economy posted its strongest growth in more than a decade.
The blue-chip index climbed 64.73 points, or 0.4 percent to 18024.17, marking its 36th record for the year, while he S&P 500 index tacked on 3.63 points, or 0.2 percent to 2082.17, marking its 51st closing high of 2014. The Nasdaq Composite fell 16 points, or 0.3 percent to 4765.42, but was weighed down by broad declines in health-care stocks. The iShares Nasdaq Biotechnology exchange-traded fund fell 4.7 percent.
The market’s latest milestone comes after a string of economic news pointed to an uptick in economic growth, despite small business sentiment at record lows. The Commerce Department Tuesday announced an upward revision of GDP in the U.S. economy from 3.9 percent to 5 percent, the quickest pace in nearly 11 years.
A new survey Tuesday found U.S. consumer sentiment increased in December to its highest level in nearly 8 years, but the housing market data was still rather grim.
New home sales for single-family units in the U.S. fell for a second straight month in November, despite the increased risk the government is injecting into the sector.
The National Mortgage Risk Index (NMRI) for Agency purchase loans rose in November to 11.69 percent, up from the average of 11.29 percent for the prior three months (revised). The risk indices for Fannie Mae, Freddie Mac, the FHA, and the VA all hit series highs in November.
“The increase in risk for all the major government agencies over the past two years is cause for concern,” said Stephen Oliner, co-director of AEI’s International Center on Housing Risk. “This is especially true for FHA loans, which would experience a tidal wave of defaults if we have another severe financial crisis.”
The Dow’s crossing of 18000 is the latest milestone in the nearly six-year bull market. The move to 18000 was the fifth-quickest 1000-point rise for the blue-chip index. It has been 119 trading days since the blue chips broke 17000. The fastest 1000-point rise was in 1999, when the Dow jumped to 11000 in just 24 trading days.
Further, investors say the markets are still posed to increase.
“We’re not at the end yet,” said Andrew Slimmon, who oversees about $4.2 billion as managing director of Morgan Stanley Wealth Management’s Global Investment Solutions. He said valuations aren’t yet too expensive, even though they’re above long-term averages. The S&P 500 is trading at 16.5 times forward earnings, higher than the 10-year average of 13.9. Adding to his positive view is the fact that investors remain cautious on stocks, as opposed to the high levels of enthusiasm often associated with a market top.
U.S. stocks increases were sparked by the Fed’s most recent policy-setting meeting, in which the Fed signaled more easy and loose money via interest rates. They are not expected to raise rates until at least the second half of 2015.
