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The U.S. stock market reached a milestone Wednesday, with the Dow Jones Industrial Average crossing above 10,000 for the first time in a year.
Financial experts say day-to-day market movement is often driven as much by psychological factors as economic ones. And the New York Stock Exchange pierced an important psychological barrier in early afternoon trading. After hovering slightly below 10,000 for much of the day, the Dow Jones Industrial Average rose just above the 5-digit mark for the first time since October, 2008.
Ted Weisberg heads Seaport Securities and is a floor trader at the New York Stock Exchange.
"I think it is a psychological number that folks like to get focused on," he said. "It is significant in that it certainly is a milestone in the sense that we have had this dramatic [market] recovery, very far, very fast over a relatively short period of time."
Weisberg spoke on Bloomberg television.
In March, the Dow hit a 12-year low of 6,547. For the year, the industrial average is up 14 percent. Will the Dow continue to rise or fall back?
"Of course, only time will tell," said Weisberg. "The market is a forward-looking indicator, and clearly the market is sending a message that things [economic conditions] are going to get better in the fourth quarter and into 2010. The market clearly looks like it wants to go higher."
Propelling the Dow's advance were encouraging earnings reports from computer chipmaker Intel, as well as banking giant JP Morgan Chase. After last year's near-collapse of America's banking system, healthy earnings by private lenders are welcome news, according to University of Maryland business professor Peter Morici.
"Confidence in the banking system is critically-important to an economic recovery," he said. "JP Morgan and the others doing well is essential for the economy moving forward."
At the same time, U.S. retail sales fell in September, although by less than many analysts had feared. The drop coincided with the expiration of a federal government program subsidizing the purchase of fuel-efficient vehicles.
The consensus view among economists is that the recession, which began in late 2007, is now over. But the United States and other major industrialized nations are expected to experience slow-to-moderate growth rates for at least another year, with unemployment rates remaining stubbornly high. Should those expectations become reality, the stock market's continued upward momentum will falter at some point, according to Guy LeBas, chief income strategist at Janney Montgomery Scott.
"Economic conditions are certainly much, much better than we saw 3, 6, and definitely 12 months ago," he said. "But the truth is, there are certainly a lot of questions that remain once we get through this initial period of recovery. And what we are looking for [projecting] is a longer term lower-growth outlook, and that suggests that perhaps the credit markets and the equity markets may be a little bit ahead of themselves, or ahead of fundamentals [rising faster than economic conditions dictate they should]."
LeBas also spoke on Bloomberg television. On a positive note, LeBas said that business spending has recovered - a sign that last year's severe credit crunch has eased.