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Record Dow is no big wow

The benchmark index's return to its 2000 level is seen as a positive, but investors are hardly elated.

By HELEN HUNTLEY
Published October 4, 2006

The Dow Jones Industrial Average closed at an all-time high Tuesday, at long last making up six years of lost ground. The celebrations were subdued.

"This is nothing remotely close to the glory days of the mid to late '90s," said Rick Metzger, a broker for A.G Edwards in Tampa. "Not a lot of people own those Dow stocks."

As Tampa investor Janet Hughes put it: "My poor little stocks still aren't going anywhere. I just picked all the wrong ones, I guess." Hughes, 51, is a construction estimator.

After trading as high as 11,758.95, a new peak, the Dow finished Tuesday at 11,727.34, a gain of 56.99 points, and five points better than the previous high, set in January 2000. But the more broadly based Standard & Poor's 500 Index is still 13 percent below its all-time high of 1,527.46. And the once-high-flying Nasdaq Composite Index, which crashed when tech stocks collapsed, is a whopping 56 percent below its peak of 5,048.62.

"Underneath the surface, all is not well," said Jeffrey Saut, investment strategist for Raymond James & Associates in St. Petersburg. "The time to be bullish was in June. Now is a better time to pull some money off the table."

Tuesday, many investors were looking for reasons to be optimistic. The Federal Reserve Board has stopped raising interest rates - at least temporarily - and oil prices are working their way down. They fell below $59 a barrel Tuesday, closing at $58.68.

"The price of oil is helping a lot," said investor Philip Lupi, 52, installation manager for a security company in Clearwater. "I paid $2.01 a gallon for unleaded today."

Lupi expects the Dow to be at 12,000 before the end of the year and he plans to play the trend: "You've got to buy stocks that are following the trend."

But others remain cautious.

"I'm ambivalent about it," said Clearwater investor Tom DeMars, 59, a property inspector. "I have a feeling this spurt is because of the elections. I'm still concerned about geopolitical issues in the world."

Largo insurance agent Michael Krizmanich, 44, said he fears problems in the housing market and rising mortgage defaults will send the economy into a recession next year.

Investment strategist Saut said he doesn't think there will be a recession, but the economy definitely is slowing:

"Things in the housing business are not so good, things in manufacturing are not so good ... it's just a question of how much they're going to slow," he said.

Although it took six years, the Dow's comeback is good news in a market that has weathered the tech stock debacle, the terrorist attacks of Sept. 11, 2001, recession and corporate scandals. The blue-chip average of 30 stocks tumbled 38 percent from its peak before bottoming out at 7,286.27 in October 2002.

As stocks fell, many investors fled the financial markets for real estate. Now the downturn in housing could turn investors back to the stock market, but so far that movement is barely a trickle, broker Metzger said.

"If you look at money flows, there's an enormous amount of money on the sidelines," he said. "CDs and money funds are paying very attractive rates. There's a lot of money that could be fuel later for a stock market fire."

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.

[Last modified October 3, 2006, 23:41:27]