The most prominent U.S. stock index, the Dow Jones Industrial Average, surged to an all-time high on Tuesday.
Within minutes of the opening bell at the New York Stock Exchange, the Dow's composite of 30 key stocks jumped to 14,254, surpassing the previous closing high of 14,164 recorded on October 9, 2007. That high-water mark occurred well before the U.S. and world economies plunged into the depths of a recession in 2008 and 2009, and stocks fell in lockstep.
Even now, the surge in the Dow comes as a contradiction to the overall state of the U.S. economy. The country's unemployment rate is still stuck at a historically high figure of 7.9 percent, with more than 12 million workers unemployed. And the country's economic advance has slowed markedly, up just one-tenth of a percentage point in the last three months of 2012.
In addition, U.S. President Barack Obama, the Democrat starting his second term, and his Republican opponents in Congress are locked in a long-running standoff over government spending and tax issues.
Just last Friday, $85 billion in mandated government spending cuts took effect, with Obama and Republican lawmakers now sparring over the effects of the cuts on the economy and the U.S. labor market.
But James Glassman, the senior economist at the big JPMorgan Chase bank, said investors see favorable trends in the U.S. economy, the world's largest.
“The stock market reflects the value of our companies, and the value of our companies reflects what people think lies ahead. And what the market’s been telling us for a while, and the reason it’s continuing to rise, is that the news on the economy continues to grow better, is that we continue to see an economy that, while there was a lot damage on the recession, it’s recovering, as it usually does, and the news we’re getting is showing you that for all the worry that people had about political uncertainty, and the fiscal cliff and the sequestration, what the market sees in the news is the economy is doing reasonably well, and meanwhile, companies are extraordinarily profitable,” Glassman said.
Patrick Socci, the dean of the Hofstra University business school in New York, told VOA the fact that the U.S. housing market has improved and that the country's central bank, the Federal Reserve, continues to pump $40 billion a month into the economy have helped buoy the stock market.
Socci said investors are overlooking negative aspects of the U.S. economy.
“I think what’s happened is that people have become desensitized or numb to certain realities. For example, up until the last few years any unemployment above 5 percent was considered absolutely unacceptable and now we’re close to 8 percent and it’s been there for quite a while. And I think people just get numb to it,” Socci said.
The Dow index includes some of the best known U.S. companies, with such household names as the world's largest energy company, Exxon Mobil, the huge retailing giant Wal-Mart, and filmmaker Walt Disney. While other broad-based U.S. indexes, such as the Standard & Poor's 500, include the stocks of many more companies, the Dow has over decades come to symbolize the long-term success of American capitalism.