Tulsa World: Dow spurt puts it at highest level in 13 months

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Dow spurt puts it at highest level in 13 months
The market has its second 200-point jump in three days.

By Staff and Wire Reports
Published: 11/10/2009 2:23 AM
Last Modified: 11/10/2009 4:02 AM

The Dow Jones industrial average stormed to its highest level in more than a year Monday as a falling dollar boosted prices for gold, oil and other commodities. Stocks also jumped as investors grew more confident that governments around the world will keep interest rates low to help the global economy.

Energy and materials stocks led the market. The major indexes rose 2 percent and the Dow jumped 200 points for the second time in three days, reaching its highest level in 13 months, closing at 10,226.94.

News that the Group of 20 countries will keep economic stimulus measures in place signaled to investors that rates will remain low. With U.S. rates near zero, the G20 news lessened demand for the dollar.

Even as investors are waiting for more signs that the economy is recovering, they've been focusing on the dollar when they make buy and sell decisions. Investors around the world see the dollar as weaker than other currencies, and so they're using it for what's known as "carry trade," to finance purchases of investments in other countries. That trend takes the dollar down further when those purchases are made.

Bruce DeShazo, vice president and investment officer at American Heritage Bank in Sapulpa, said he views Wall Street's upswing as "real significant because, if for nothing else, it tends to improve the confidence in the market."

He compared the market's reaction to a beach ball being pulled under water and then when let loose pops quickly back to the surface.

The Dow could be close to 11,000 by the end of the year, DeShazo said. He expects the index to exhibit more 200-point swings up and down.

"But overall, it's growing," DeShazo said.

Jake Dollarhide, CEO of Longbow Asset Management Co. in Tulsa, said the fact that the market hit a new high for the year above 10,000 is more significant than a few weeks ago when the Dow first broke through the 10,000 mark.

"I think it is a nice cherry on the top of the comeback we've had since the March lows," he said.

On March 9, the Dow closed at a low of 6,547.

"A healthy stock market is good for the economy. It's good for people's mindsets as they go into the holiday shopping season," Dollarhide said.

He said 2010 could be great for stocks, and that the Dow could be near 13,000 by the end of next year.

Dollarhide suggests that investors who are fully invested in the stock market remain there. To those with a lot of cash sitting on the sidelines thinking about re-entering the market, Dollarhide recommends buying stock on dips in the market or dollar-cost averaging by investing a little for the next four to six months.

But some analysts are questioning investors' stock moves given the still-weak economy and warn that stocks and other investments could suffer big losses if the dollar were to turn higher.

"It feels like it's on fumes," said Sean Simko, head of fixed income management at SEI Investments in Oaks, Pa., referring to the market's advance. "Although fundamentals are catching up, they're not caught up."

He said the dollar's drop and the surge in stocks and commodities are making it hard for investors to get a clear picture of how fast the economy is rebounding.

Still, many investors like a weaker dollar because it helps U.S. exporters by making their goods cheaper to overseas buyers and giving the companies a boost when they convert profits from abroad to dollars.

Commodities prices, meanwhile, tend to rise when the dollar is down, so gold topped $1,100 an ounce. Crude oil rose $2 to settle at $79.43 per barrel on the New York Mercantile Exchange.

Energy and materials stocks rose along with commodities prices.

The Dow rose 203.52, or 2 percent, to 10,226.94, its highest finish since Oct. 3, 2008. The Dow's gain of 455 points, or 4.7 percent, since Wednesday is its biggest four-day climb since July.

The index rose as high as 10,228.23, topping its previous 12-month trading high of 10,119.46 set last month.

The Standard & Poor's 500 index rose 23.78, or 2.2 percent, to 1,093.08, its sixth straight advance. The Nasdaq composite index rose 41.62, or 2 percent, to 2,154.06.

Laurie Winslow of the Tulsa World Business staff contributed to this story by The Associated Press.

By Staff and Wire Reports

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