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Stocks surge as Dow closes near 13,000

By HELEN HUNTLEY, Times Personal Finance Editor
Published April 21, 2007

Strong earnings reports combined with bandwagon psychology to produce another record close and talk of a "Dow 13,000" on the Dow Jones Industrial Average Friday.

With Friday's finish of 12,961.98, the blue-chip index is closing in on 13,000, another one of those big market milestones. The Dow was up 153.35 points for the day and 349.85 for the week. The Standard & Poor's 500 Index and the Nasdaq Composite Index both are at six-year highs.

"A lot of people thought the February correction might be the start of a serious correction or even a bear market," said St. Petersburg money manager Timothy McIntosh of Strategic Investment Partners. He said analysts "set the bar low" for companies by forecasting earnings gains of 3 to 4 percent this quarter. "Now companies are really jumping over the bar."

Google, Caterpillar, Honeywell, American Express and Xerox all joined the earnings parade Friday, beating analyst expectations. Bloomberg News reported that about 67 percent of the Standard & Poor's companies reporting so far this quarter exceeded estimates.

Many people take the reports as a sign that the economy is doing better than expected.

"The recession talk has gone away and the economy seems to be stabilizing," said Grady Garrett, portfolio manager at LBS Capital Management in Clearwater.

"Technically the market is in good shape; the trends are up," he said. "Some people will start moving into stocks based on the trend alone. If we can push a little bit higher here, the people on the bearish side will be chased in."

That's already happening to some extent, said Jeffrey Saut, chief investment strategist for Raymond James & Associates in St. Petersburg.

"The performance derby for professional money managers is driving the momentum right here," he said. "But this kind of crescendo on the upside historically is more the end of the move rather than another big leg up."

Saut said a degree in psychology, rather than one in business, might be more helpful understanding what's going on in the market now.

However, one investor who actually has a degree in psychology, isn't relying on it for her investments.

"I was trained early on by my grandparents to put your money in and leave it there and try not to be affected by the trends," said Angela McBride, a Tampa psychologist.

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

[Last modified April 20, 2007, 22:46:03]