Dow Closes Above 11,000

Jan. 9, 2006 — -- Today is a milestone for the stock market in its slow recovery from the Internet bubble burst. For the first time since June 7, 2001, the Dow Jones Industrial Average, which gathers 30 of the largest and most influential companies, closed above 11,000 points.

The Dow closed at 11,011.90 points, up by 0.49 percent.

"The fact that the Dow hit the 11,000 points is psychologically important," said Bill Cheney, chief economist with John Hancock Financial. "There has been a sense that the Dow was stuck, and people know now that it is unstuck."

The index was driven up by General Motors, up 7.74 percent, to $22.41, boosted by a higher Goldman Sachs rating. On the New York Stock Exchange, JP Morgan rose 1.62 percent to $40.67, Merrill Lynch climbed 1.43 percent to $69.68, and Alcoa was up 1.19 perrcent to close at $30.57.

"The market is up because we had a good year," Cheney said. "We had a healthy growth and higher profit margins."

The stock market was also boosted by the expectation that the U.S. Federal Reserve would soon stop to increase the interest rates after 18 months of interest rate hikes.

"This is good for the market for two reasons," said Alec Young, equity market strategist with the Standard and Poor's equity research department. "First, it reduces borrowing costs for companies, so it improves the companies' ability to make profits. Second, low interest rates reduce the interest for bonds and make equities more interesting" for investors.

The combination of higher corporate earnings and a flat stock market made shares more appealing to investors, according to Young. Last year, earnings were up 13 percent, whereas the Dow Jones slightly decreased.

As a result, today investors pay almost the same price for stocks as they paid last year, but they receive more dividends. That is a significant improvement for many retirees who live on dividends.

According to experts, the stock market should go up more this year. The Standard & Poor's Equity research department expects the market to reach 11,600 points at the end of 2006, in line with John Hancock Financial's forecasts.

The market has to gain more than 700 points to reach its record-high, hit in January 2000. According to Cheney, today's performance "will make people feel better, but people will not forget what happened" when the Internet bubble burst.

Some Dow Statistics of Interest:

What is the Dow? The Dow Jones Industrial Average is a stock index used to measure the momentum and movement of the stock market. Today, it has 30 "component" companies that are some of the largest and most influential companies in the United States.

Dow Jones first published the industrial average on May 28, 1896, when there were 12 component companies: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather pfd. and U.S. Rubber. The Dow closed at 40.94 on its first day.

Which companies are in the Dow today?
1. 3M Co.
2. Alcoa Inc.
3. Altria Group Inc.
4. American Express Inc.
5. American International Group Inc.
6. AT&T Inc.
7. Boeing Co.
8. Caterpillar Inc.
9. Citigroup Inc.
10. Coca-Cola Co.
11. E.I. duPont de Nemours & Co.
12. Exxon Mobil CP
13. General Electric Co.
14. General Motors Corp.
15. Hewlett Packard Co.
16. Home Depot Inc.
17. Honeywell International Inc.
18. Intel Corp.
19. International Business Machines Corp.
20. Johnson & Johnson
21. JP Morgan Chase Co.
22. McDonald's Corp.
23. Merck & Co. Inc.
24. Microsoft Corp.
25. Pfizer Inc.
26. Procter & Gamble Co.
27. United Technologies Corp.
28. Verizon Communications Inc.
29. Wal-Mart Stores Inc.
30. Walt Disney Co. (the parent company of ABC News)