Dow average surpasses record high as market opens

The Dow Jones industrial average, which measures the performance of 30 blue-chip companies, rose more than 80 points at the start of trading on Tuesday, to 14,207.94. That surpasses its previous record close of 14,164.53, which it achieved nearly five and a half years ago, as well as its record intraday high, set around the same time, of 14,198.10.

Of course, a few things have happened since October 2007. The housing market collapsed, the financial system went into meltdown, the European Union started to fray and politicians dragged the United States through an onoff-on-again fiscal imbroglio.

Since a low point in March 2009, the Dow Jones index has more than doubled, stunning even the most seasoned stock market watchers.

“What’s amazing about this bull market is that people still don’t think it’s real,” said Richard Bernstein, chief executive of Richard Bernstein Advisors, a money management firm. “We think this could be the biggest bull market of our careers.”

There are some important caveats, however. The Dow is a rather narrow measure of the stock market, so it can provide a somewhat distorted picture of the market’s performance.

At 1,535.31 points in Tuesday morning trading, the much broader Standard & Poor’s 500-stock index is still a ways off its nominal high of 1,565.15 points, also set in October 2007. After taking inflation into account, both indexes are down from their earlier highs in 2000. And, on an inflation-adjusted basis, the S.&P. 500 is down even after factoring in returns from dividend payments.

Still, despite its flaws, the Dow Jones average is the recognizable face of the stock market to many Americans, and it contains some of the best-known American corporations, like Wal-Mart, CocaCola, General Electric and International Business Machines.

The stock prices of some of the companies in the index have more than doubled since that low point in 2009. For instance, American Express is up more than 400 percent. After the crash of 1929, it took 25 years for the Dow to get back to the nominal level it plunged from. The severe economic contractions of the 1930s, during which scores of banks collapsed, weighed heavily on stocks.

But one essential government institution did things differently after the 2009 low point, and that has bolstered the stock market. The Federal Reserve has added more than $3 trillion of monetary stimu- lus 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.

“The Federal Reserve is here, and is going to do everything possible to support this recovery,” Ben S. Bernanke, chairman of the Fed, said in an interview with “60 Minutes” in March 2009. It is probably more than coincidence that stocks began to recover strongly after that broadcast. “Central banks do matter. Central banks have always mattered,” said David Rosenberg, a chief economist at Gluskin Sheff and Associates.