Strong earnings from corporate America and optimism that the meltdown in the housing market will be contained sent Wall Street’s yardstick of blue-chip stocks through the 14Â 000 level for the first time on Tuesday.
Less than three months after it scaled the 13Â 000 mark, the Dow Jones industrial average rose 60 points in early trading yesterday to 14Â 011 as dealers took heart from rising profits in the financial sector and signs of a pick-up in demand for manufactured goods.
Strong merger and acquisition (M&A) activity also helped drive the stock market higher before official figures today on consumer inflation and activity in the troubled real estate market.
“This is earnings and momentum. People smell a hot market,” said Michael Metz, chief investment strategist at Oppenheimer in New York. “Nothing seems to disturb the bulls. So far, earnings have been pretty good and have been augmented by M&A deals and by big buybacks.”
Shares in American Express rose by 5% after the company received a broker’s upgrade and a 30% increase in profits from Merrill Lynch also helped drive the Dow above 14Â 000.
Merrill’s shares later fell back — dragging the Dow down below 14Â 000 with it. By lunchtime in New York, the Dow was up by just over 44 points at 13Â 995.
Despite the strong performance of Wall Street in recent months, some analysts are concerned that some institutions are sitting on large losses as a result of hedge fund speculation in mortgage-backed securities.
Figures for housing due out this week will provide evidence on the health of the property market, but Wall Street is expecting the weakest figures since the recession at the start of the 1990s.
The central bank has kept interest rates on hold at 5,25% for more than a year, and Ben Bernanke, the chairman of the US Federal Reserve is likely to argue that underlying inflation pressure remains a concern. — Â