Dow Jones passes 13,000
April 25, 2007
The Dow Jones industrial average passed 13,000 Wednesday for the first time in history. Some experts didn’t see the news as all good, though, because many big corporations’ earnings were made overseas, and rising energy costs, a slumping housing market and a possible credit crunch still cause worry.
Not all gloom: Bob Waters, a financial advisor with Edward Jones Investments in Clovis, said there are always some areas of the economy that cause concern, but stocks remain one of the best investments over time.
Good time to buy: Waters compared the price-to-earnings ratio for stocks today with that in March 2000. The higher the number, the more expensive stocks are in relationship to earnings, he explained. The price per share of a company’s stock is divided by its earnings per share for the ratio.
In March 2000, the Standard & Poor’s 500 price-to-earnings ratio was 31, Water said. Today it is 18, he said.
“The price of stocks in relation to their earnings is just over half where they were in March of 2000,” he said.
Changing economy: Markets don’t always go straight up, he said, and the economy no longer goes through “dramatic boom and bust cycles,” but tends to have mini-cycles of highs and lows.
There’s “no reason for the euphoria,” Waters said, “but at the same time it’s a positive thing.”
Ups and downs: Financial planner Larry Erwin of Erwin & Associates in Clovis said he’s used to seeing the experts hedge their bets and predicted a pullback today after Wednesday’s peak.
“(Today) will probably be a down market,” Erwin said.
Corporate driven: Market performance is determined by corporate profits, Erwin said, “and corporate profits have been good,” adding, “it looks like they’re going to continue that way.”
The markets are “emotional,” he said, and “it’s hard to break one of these barriers, but once it’s broken, we’re on to the next one.”
Erwin started in the financial business when the Dow was 450, he said, 35 years ago.
“In the long term, as long as businesses are making money, the market’s going to move up,” he said.
Another milestone: The stock market’s best-known indicator swept past its latest milestone shortly after trading began Wednesday, and even made it past 13,100, rising as high as 13,107.45. The Dow, which has risen in 18 of the past 20 sessions and gained more than 780 points in that time, closed at 13,089.89, up 135.95, or 1.05 percent. It was the Dow’s 35th record close since the start of October.
— The Associated Press contributed to this report.