Dow Jones Industrial Average Soars to All-Time High

Yahoo's Mike Santoli reveals which factors are leading to the latest bull market on Wall Street.
7:55 | 03/05/13

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Transcript for Dow Jones Industrial Average Soars to All-Time High
This is a special -- -- from the ABC news now. Good afternoon everyone I'm down Cutler in New York a record breaker for Wall Street the Dow trading at all time high levels taking a look at midday trading here is where it's that up -- 146. Points. At 141276. The market had been fluttering around the previous high -- 141164. At -- West said in October 2007. And that fluttering hasn't been happening for a couple of days now but as we see the -- in uncharted territory in this morning when the market -- stocks simply exploded coming -- 140 points in fact in just the early morning barreling minutes. A morning trading of one of -- Mike -- from Yahoo! finance to explain what is exactly pushing this rally forward Mike good afternoon to you. Hello a lot of excitement on Wall Street what is the driving force. While the first indicated in mind is this is not some new burst of excitement actually we've been now up for four years running and all year. Really back to November we've been pretty much marching higher so today I think really the fact we were so close to an all time high. The news front remained pretty -- Corporate profitability looks like it's pretty much in place to grow as expected and it just got that many more people off. Off the sidelines and decided to be involved and not just watch it that's the very short term read on it so there's nothing that really is going on today that says hey finally. We're fully out of the woods of the financial crisis in the Dow should be trading back -- wasn't I was seven it's really more the continuation of a process that's been underway for a few years now. So sometimes in bull markets though and a lot of investors can get caught up -- hyped or -- a look at the genuine confidence of the markets what you see is there are pretty. Balance on what's pushing this. I think we do not have a lot of -- driving this market in fact if anything you still have kind of an overlay of skepticism regarding. Whether the market should be trading. At these levels now there's some very fair criticism -- to you know how we got here in terms of the Federal Reserve putting a lot of new money out into the system keeping rates unusually low. Big -- corporate profits have actually kept pace with where the Dow is gone. -- that seems like it's a firm underpinning but I don't really think the risk here is principally. That the broad public has gotten so excited about stocks that in fact they're setting themselves up for a fall if anything. There's been general resistance to kind of buying into the idea that the market is on a combat. -- what wanna go to the Fed just on the first -- -- one if you can't get it kind of flashback perspective because the last big rally was in 2007 the economy looking much different at the time. Bear Stearns Lehman Brothers they were still in existence the auto industry look much different. Unemployment rate in 2007 was four point 9% right now we're at seven point 9% I mean the economy was certainly had a very different point she is -- any similarity between that rally in this that we're now experiencing. I mean this similarity -- on the actual levels are not very strong except that back in 2007 we were basically. Four -- five years into. What we considered at the time to be a fairly weak economic recovery in 2007 even though unemployment was in good shape in the housing market was often ties -- very very strong levels. You know -- there was a general sense of the economy was okay but we didn't really feel like it was boom times as we were comparing it to the tech bubble days late ninety's. So I do think that. Basically it was more obvious in 2007 that the economy was in decent shape. Where you've had right here is -- the economy on this sort of painful fits and starts kind of recovery that has mostly benefited. The big corporations. And people who already were invested in the markets not something that has felt. Particularly broad based so I feel like there's a perception issue based on the fact that is not really been that kind of fully inclusive. Recovery that is really told everybody with a. You you did mention about the government's role in this latest -- fed chair Ben Bernanke has been pretty adamant about pumping money into the economy especially in the bond markets how big of a factor that are his efforts in continuing this rally. -- -- big factor but it's also a big factor you have to brought it out beyond the rally -- say what's -- the bay in the Federer the Fed's role in keeping rates so low on the economy as a whole and all central banks throughout the world are basically fighting the same campaign and I would say. That role has been significant. Simply because if you look at the cost and supply. Of credit to the economy the Federal Reserve is doing all it can to keep it available you look at auto loan volumes. You want -- look at -- commercial loan volumes. Even mortgages are far more inexpensive. And available than they otherwise would have been if the Fed warned here now it also gives confidence to investors that the -- is kind of can't be there to support the markets. That's some unknowable factor in this the fact that the market has been able to hit new heights here. But I don't I think you have to get take it beyond the idea that the Fed is somehow handing money to investors to buy stocks. -- -- -- It's fair point I also want to ask you about some of the volatility concerns a lot of analysts are saying that in fact this rally is really not that -- -- of a -- to begin with that we've been having is 100 plus point swings back and forth over the past couple of months and that really this -- not necessarily. Cause to celebrate. Is very short term concern I think at the moment it's definitely something that has -- a break from the prior a couple of months where you had -- usually com. Environment for the first stocks right now so 100 point swings in the -- of 141000. Is not in itself. Anything very dramatic he doesn't really mean that it's stressing this system very sick seriously but it does show. There's at least -- claims have may be this trend is kind of played out this very gentle upward glide that we've had since November has probably that phase of its over so what happens now. A lot of folks including me have been calling for some kind of a pullback in the market before very long you have to kind of just. Reset expectations lower when the market's -- on one of these roles and kind of refreshed buying power. And sort of figure out exactly what the right level is for a lot of new investors to come in we haven't done that yet this year. The volatility recently might imply. That we're getting close to 21 of those periods -- we do back off a bit and then reassess the underlying strength to stop. If you take a historical look and then kind of -- a psychological factor in when the market does reach an all time high traditionally what has happened has -- have the levels sustain themselves over months over years or is that a precipitous drop immediately. It's been very rare for the. Market to hit a new all time high and for that to be you know an immediate cliff that the market walks off. Usually that's not the way it -- and there is a little bit of kind of hesitation that sometimes heads into the market when you get an all time high. Because what do you tell when you tell somebody that this markets at an all time high. There -- good it instinctively worries it too late for -- -- and should I worry about the fact that we've never been at these prices before but ultimately usually kind of means that we might be closer to the end in the beginning of a trend but not very close to the -- it really does continue on from there aren't. One thing I would point out. Right now we're only talking about the Dow being at an all time high. The other broader indexes like the Standard and Poor's 500 in the NASDAQ are not quite there yet so I had something to watch -- -- you wanna see. It to be become as broad based as possible. To think that that the market actually has some stamina here. All right well of course reading -- to watch -- to take one last look at the big book before I let you -- Mike the Dow is trading up 146 points 141270. For a of course we'll have to wait and see how things are gonna close out of 4 o'clock this afternoon or for now Mike -- toll thank you so much for joining us from Yahoo! finance studios and of course -- have a complete report on For now though we're gonna return your back your regularly scheduled program. -- it's -- -- special with the from in the ABC news now.

This transcript has been automatically generated and may not be 100% accurate.

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