Hat’s off to his­toric run by Wall St., but what does it mean?

The Denver Post - - BUSINESS - By Mar­ley Jay

You could say the Dow cruised to 22,000: The blue chip in­dex rose to its lat­est mile­stone with­out much ex­cite­ment or drama as aero­space gi­ant Boe­ing and a few other com­pa­nies did most of the work.

Stocks have spent the last five months grad­u­ally mov­ing higher, with­out many big gains or losses. They’ve drawn strength from ris­ing U.S. cor­po­rate prof­its and con­tin­ued growth in the econ­omy, along with re­cov­er­ies in Europe and other re­gions. And in­vestors still be­lieve that if the global econ­omy or the mar­ket ran into se­ri­ous trou­ble, cen­tral banks would step in to help, as they did af­ter the 2008-09 global cri­sis. That’s cre­ated a very calm stock mar­ket.

Given the peace and quiet in the mar­kets, it’s fit­ting that a small move — 52 points, all of them es­sen­tially from Ap­ple — brought the Dow to its new­est mile­stone.

How did we get here?

Boe­ing, McDon­ald’s and health in­surer Unit­edHealth have con­trib­uted more than 700 points out of the 1,000 the Dow has gained since March 1, when the in­dex topped 21,000 points for the first time. Strong earn­ings have helped all three com­pa­nies, with

Boe­ing mak­ing huge gains af­ter its sec­ond-quar­ter re­port in late July. It has had a far bet­ter year than any other Dow com­po­nent and is now the high­est-priced stock on the in­dex.

Mean­while, Gold­man Sachs and IBM, which helped lead the Dow’s surge in late 2016 and early 2017, have come crash­ing back to earth. They’re the worst per­form­ers on the in­dex this year.

What’s a 1,000-point Dow move in 2017?

Not what it used to be. As the in­dex goes higher and higher, each round­num­ber mile­stone rep­re­sents a smaller move. When the Dow rock­eted from 10,000 points to 11,000 points in early 1999, it was a 10-per­cent leap. The move from 21,000 to 22,000 trans­lates to a gain of just 4.8 per­cent.

Is the Dow still a thing?

Charles Dow’s in­dex is more than 120 years old, and ex­perts and mar­ket­watch­ers con­stantly de- bate how well it rep­re­sents the mar­ket.

With only 30 com­pa­nies, the Dow re­flects much less of the econ­omy than the Stan­dard & Poor’s 500 in­dex or the Rus­sell 1500, which pro­fes­sion­als pay more at­ten­tion to. And while this is more tech­ni­cal, Dow points are based on dol­lars of stock price in­stead of the rel­a­tive sizes of com­pa­nies. So a 1-per­cent move for an ex­pen­sive stock like Boe­ing or Gold­man Sachs, both priced well above $200 per share, will move the Dow more than Mi­crosoft, worth around $70 per share, or Gen­eral Elec­tric, at $25 per share, even though in­vestors value Mi­crosoft at more than $550 bil­lion to about $90 bil­lion for Gold­man.

Is it warm in here?

The Dow is fa­mous enough to be rec­og­nized by a lot of peo­ple, and that’s a kind of rel­e­vance. And for all the ar­gu­ments about the most pre­cise mar­ket indi­ca­tors, the Dow and S&P 500 have per­formed about the same this year. As of Wed­nes­day, the Dow is up 11.4 per­cent for the year and the S&P 500 is up 10.7 per­cent.

Richard Drew, The As­so­ci­ated Press

Trader Pe­ter Tuch­man, cen­ter, works on the floor of the New York Stock Ex­change on Wed­nes­day. A big gain for Ap­ple sent the Dow Jones in­dus­trial av­er­age above 22,000 for the first time.

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