Dow’s Close Tops 3,000 Barrier for First Time : Stocks: The index had passed the mark on other days, but retreated before the end of trading. Experts said the record reflects confidence in a recovery.
With surprisingly little fanfare, the Dow Jones industrial average closed above 3,000 Wednesday for the first time in history. Traders, who had broken out champagne bottles nearly a year ago in hopes of passing this milestone, said the advance reflected greater investor confidence that an economic recovery is on the way.
During the day, the Dow index of 30 industrial stocks bobbed up and back several times across the threshold before finally settling at 3,004.46, up 17.58 from Tuesday’s close. The gain came on the heels of a 53.71-point rally on Tuesday.
Previously, the widely followed Dow index had crossed the 3,000 mark briefly during trading sessions, in July and more recently on March 6. But the round number proved to be a formidable psychological barrier, and each time the market fell back by the close of the day. The Dow’s previous record high close, 2,999.75, was set last July 16 and 17.
Last summer, recalled Robert M. Greber, executive vice president of the Pacific Stock Exchange, “everyone was jubilant. They were talking about new highs. But then, the market fell apart. If traders seem subdued, it might be because they are afraid to celebrate too soon.”
Traders said Wednesday’s milestone was important because it affirmed a broader market rally that has been under way for some time.
“This is a strong sign that the market is forecasting that we’re getting closer and closer to an end of the recession,” said Gene Jay Seagle, director of technical research at the investment firm Gruntal & Co. He said the Dow’s performance Wednesday should eliminate worries that the broad-based rally--including an extremely strong performance from over-the-counter stocks--may have been only a temporary aberration. “The fear element is gone,” he asserted.
Some of the biggest gainers Wednesday were the basic industrial companies that should benefit from the resumption of economic growth. The expectation of an economic recovery has been the driving force behind the market rally since January, and investors reinforced that sentiment Wednesday. Dow Chemical jumped $2.375 a share to close at $51, Cummins Engine rose $2.25 to $39.125, Monsanto gained $3.375 to $63.25 and Alcoa jumped $2.625 to $68.
Traders and analysts said the Dow’s jump also reflects a belief that the Federal Reserve Board will move soon to ease credit by lowering interest rates. They said many institutional investors also are relieved that the corporate earnings reports released for the first quarter of 1991 are mostly in line with expectations and in some cases significantly better.
But, to some extent, the successful assault on 3,000 was anticlimactic. Other stock indexes have been setting record highs for weeks. Among them were the Standard & Poor’s 500, the NASDAQ composite index of over-the-counter stocks and the New York Stock Exchange composite index. Although in previous major rallies the Dow index of blue-chip stocks almost always led the charge, this time it was decidedly a laggard.
One explanation is that the Dow is, after all, an index of industrial stocks. There has been concern that these giants might take longer to recover from the national recession and might not perform as well as the many smaller “growth stocks” included in the broader indexes.
“The Dow is really basic industrial America,” said Michael Metz, portfolio strategist at the investment firm Oppenheimer & Co. “Now it’s playing catch-up on the conviction that the industrial economy is recovering.”
A significant minority of traders and investment strategists, however, assert that the narrow Dow index, although it is widely cited in news reports, is no longer a key index. They contend that its performance merely reflects the peculiarities of the few stocks included in the index, and they played down the significance of Wednesday’s milestone.
These critics noted that International Business Machines Corp., one of the stocks included in the Dow average, has performed particularly poorly in recent weeks. Without IBM’s weak performance, they said, the Dow almost certainly would have set a new record some time ago.
“All you reporters want to make headlines out of the Dow Jones industrial average crossing 3,000,” said Stefan D. Abrams, chief market strategist at Kidder, Peabody & Co. “It’s a non-event.”
In addition to the Dow, however, many other stock indexes again set record highs Wednesday. These included the NASDAQ composite index, which gained 4.56 to close at 511.31; the New York Stock Exchange composite, up 1.50 to 213.21; and the S&P; 500, up 2.83 at 390.45, among others. The Dow utilities index, however, was down for the day, off 1.13 at 219.76.
Traders interviewed Wednesday predicted that the new confidence instilled by the Dow finally closing above 3,000 will cause the general stock market rally to continue, although they were divided over how long and how far.
New York Stock Exchange volume was a heavy 246.93 million shares, up from 214.48 million on Tuesday. On the Big Board, 1,032 stocks showed gains, 576 declined and 501 were unchanged.
COLOR, Breakthrough The Dow Jones index of 30 industrial stocks finally surpassed the record level after an earlier attempt last month. Wednesday close: 3,004,46 up 17.58 March 6: Index moves above 3,000 before closing at 2,973.2, up a fraction.
