It's in the history books. The Dow Jones industrial average closed at a record high of 14,253.77 on Tuesday — erasing losses from the financial crisis.
Companies that supply consumer staples and discretionary goods led the 10 sectors within the index, indicating that consumers fueled the stocks that have led the market since the Dow's last record, which was before the recession in 2007.
Why did it happen?
The Dow high is another sign that the nation is slowly healing after the worst recession since the 1930s. It comes as car sales are at a five-year high, home prices are rising and U.S. companies continue to report big profits.
Specifically Tuesday, good economic news helped lift stocks. Retail sales in the 17 European countries that use the euro rose faster than expected. China's government said it would support ambitious growth targets. And a report showed U.S. service companies grew last month at their fastest pace in a year.
Also, since the 2009 low point, one essential government institution has done things differently. The Federal Reserve has added more than $3 trillion of monetary stimulus to the economy and more than $1 trillion of bailout loans to financial firms since the 2008 financial crisis. This was done to prevent a widespread banking crash and help the wider economy. Perhaps as important is the psychological shot in the arm: When investors believe the Fed is providing a systemic backstop, they will be more likely to get back into the market and stay there.
Is it a fluke?
Apparently not, since the broader Standard & Poor's 500 index closed at 1,539.79 — 25.36 points from its record, also in October 2007. The strength of consumers is also reflected in the S&P 500.
In fact, Dow records are dismissed by some investors as unimportant because the index comprises just 30 stocks. Many professional investors prefer to follow the S&P 500, which tracks 500 companies. But the Dow has closely followed the ups and downs of its rival over the years and is a good proxy for how big companies are doing.
Is it a big deal?
As rebounds go, this has been an unusually quiet one. There is a fear among many investors that stock gains can disappear in a flash. One determinant is whether stocks are seen by traders as relatively expensive, therefore vulnerable to a sell-off. The big question remains whether the stock market can keep going up.
The focus on company profits explains why the stock market can be doing well while most people are not experiencing a resurgent economy. As a wider analysis, the Dow's rise further underscores the contrast between corporate America's rapid recovery since the financial crisis and the rest of the country's ongoing struggle to regain its footing. Forecasters still expect the U.S. economy to grow just over 2 percent, with some warning that the across-the-board budget cuts known as the sequester could further dampen growth. Analysis on A4
Names we know in the Dow
The Dow is the recognizable face of the stock market to many Americans because it contains some of the best-known American corporations. The stock prices of some of the companies in the index have more than doubled since the low point in 2009.
Among the winners
Consumer favorites are among the top performers, with Home Depot, McDonald's and Wal-Mart (in the top four) each rising more than 60 percent since the previous Dow record in October 2007.
The Dow's recent strong marks mask the woeful performance of some important companies. For instance, General Electric, held for generations in family portfolios, is down considerably.