When the Dow Jones Industrials (DJINDICES:^DJI) dropped below 7,000 in early 2009, many investors thought the venerable market measure might never return to its glory of 2007, when it seemed to set new highs all the time, eventually topping out above 14,000 before its historic plunge in the financial crisis. But with the latest push higher in the stock market, the Dow is within 400 points of its closing high of 14,164.53, set on Oct. 9, 2007. Will the Dow get there?
Already, we've seen new record highs among a number of stocks within the Dow. Disney (NYSE:DIS) hit a record high just yesterday as the company continues to build its multimedia empire, taking full advantage of its extensive library of content while also expanding and developing new content through smart acquisitions of content providers like Pixar, Marvel, and, most recently, Lucasfilm. So long as people crave entertainment, Disney has the capacity to help pull the Dow higher.
3M (NYSE:MMM) also bettered its former record yesterday in anticipation of today's earnings report. Although some question whether the company still has its innovative streak, the conglomerate has done a good job of growing through acquisition with timely purchases of businesses with great potential. Its most recent buyout of Ceradyne, for instance, should expand 3M's reach in defense and other industries where the ceramics-maker plays a key role.
For Travelers (NYSE:TRV), a new record high earlier this week came less from absolute business strength than from relief that a bad situation didn't turn out much worse. After Hurricane Sandy, analysts dramatically cut their earnings estimates for the property and casualty insurer, with total industry costs initially estimated at up to $50 billion. Yet when the company reported earnings, its results turned out much better than many had feared, and the higher premium that Travelers has been able to charge in response to Sandy and 2011's Hurricane Irene will help the company boost results for years to come.
Coming off their highs
Several other stocks have hit new all-time highs in the past several months, even though they've pulled back somewhat from those levels. Chevron broke through its former record back in September, and the stock is still within a few percent of that record level despite its recent pullback. In order to press higher, though, Chevron needs to combat falling production levels and find new ways to grow. Fortunately, with so many energy prospects around the world, finding that growth won't be as hard as it was before unconventional production methods like hydraulic fracturing opened up new opportunities.
IBM (NYSE:IBM) has also set record highs, breaking through $210 per share in early October and rising back toward those levels yesterday after a strong earnings report. With the tech giant aiming for $20 per share in earnings by 2015, further records appear likely if the company comes close to achieving that goal, and so far success in transforming its business into a high-margin IT services powerhouse has helped bring about the earnings growth it needs.
Go for a record
In order for the Dow to reach new highs, it will likely need more help from the companies that have been hitting all-time highs. Be sure to keep your eyes on these stocks in particular as you watch the market's attempt to set a new record.
Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends 3M, Chevron, and Walt Disney. The Motley Fool owns shares of International Business Machines and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.