Why the Dow Surged Past 14,000

Positive news from the automobile sector and a mixed employment report have pushed the Dow Jones Industrial Average (DJINDICES: ^DJI  ) into rarely seen territory. With roughly an hour left in the trading session, the blue-chip index is up by a whopping 145 points, or 1.04%, passing the 14,000-point threshold for the first time in more than five years.

Although the 14,000 mark is nothing more than an arbitrary round number, crossing it is nevertheless noteworthy because of how infrequently it has happened in the past. According to the Associated Press, the Dow has eclipsed this point only 15 times before, the last being on Oct. 17, 2007 -- nearly a year before the bankruptcy of Lehman Brothers sent equity markets spiraling downward.

To give you some additional conversation fodder for the weekend, if the Dow holds steady and closes above this threshold, it will be only the ninth time in history it has done so. In addition, we'll be within 159 points, or roughly 1%, of its all-time high of 14,164.

The catalyst for today's rally appears to be twofold. First, many of the world's largest automakers announced January sales figures today that exceeded expectations. Sales at Ford (NYSE: F  ) rose by 9% over the same month last year, General Motors (NYSE: GM  ) and Chrysler Group took in an additional 16% each, and Toyota (NYSE: TM  ) saw sales rise by a staggering 27%.

The numbers were particularly surprising because they came in January and followed a slew of otherwise downbeat economic releases related to consumer sentiment, initial jobless claims, and gross domestic product. As an analyst at auto market researcher Edmunds.com told The Wall Street Journal: "January's numbers show that vehicle sales stayed strong even after the holiday ads faded away."

A second reason the Dow surged today related to the January jobs report, released this morning by the Department of Labor. The report estimates that employers added 157,000 jobs last month -- roughly in line with the consensus estimate -- and that the unemployment rate increased to 7.9% from 7.8% in November.

Although the numbers themselves were "pretty good but not fantastic," as one analyst put it, the uplifting aspect was that hiring over the last two years has beaten original projections. According to acting Secretary of Labor Seth Harris, "January's report marks 35 consecutive months of private sector job growth totaling more than 6.1 million jobs."

On the heels of this news, all but one of the Dow's 30 component stocks are in the black, with Bank of America (NYSE: BAC  ) leading the way higher, up by more than 3% in afternoon trading. Suffice it to say that for a still-recovering lender like B of A, any news that could increase housing values, and thus the collateral on its loan portfolio, is good news.

Want to learn more about Bank of America?

To learn more about the most-talked-about bank out there, check out our in-depth company report on Bank of America. The report details Bank of America's prospects, including three reasons to buy and three reasons to sell. Just click here to get access.


Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2231271, ~/Articles/ArticleHandler.aspx, 4/21/2014 3:24:57 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement