Dow Sails Past 13,000

Strong earnings reports and a rise in durable goods orders lifted major indexes. But some market pros see troubling signs for stocks

The Dow Jones industrial average finished above the 13,000 for the first time Wednesday, thanks to strong earnings from companies like Boeing (BA) and a larger-than-expected 3.4% rise in March durable goods orders. New home sales came in weaker than expected, but didn't stop the buying for long.

The biggest gainer in the Dow was Alcoa (AA), which jumped 5%on news that the aluminum giant will explore selling its packaging and consumer segment, which generated approximately $3.2 billion in revenue and $95 million in after-tax income in 2006.

The Dow Jones industrial average surged 135.95 points, or 1.05%, to 13,089.89, after touching a record intraday high of 13,107.45 in the last hour of trading. The broader Standard & Poor's 500 index climbed 15.01 points, or 1.01%, to 1,495.42. The tech-heavy Nasdaq composite rose 23.35 points, or 0.92%, to 2,547.89.

Dow Jones Industrial Average Milestones
13,000 Apr. 25, 2007
12,000 Oct. 19, 2006
11,000 May 3, 1999
10,000 Mar. 29, 1999
5,000 Nov. 21, 1995
1,000 Nov. 14, 1972

Although reaching the 13,000 mark for the Dow shows there's euphoria in the market, driven by positive earnings and guidance and some say liquidity, some market pros worry that investors are ignoring big negatives: oil prices remain above $65 a barrel and the dollar keeps falling. "The wall of worry is out there but the market remains indifferent," says Peter Cardillo, chief market economist at Avalon Partners in New York.

He added that Wednesday's release of the Federal Reserve's Beige Book report on economic conditions "seems to portray something we all like to have: a Goldilocks economy." But he doubts that can last given high oil prices and the weak dollar. "That's the missing link and the reality check that the market is going to encounter," Cardillo says.

Says Joseph Battipaglia, chief investment officer at Ryan Beck & Co.: "It's troubling because complacency is fully restored to the investors' lexicon." He's also worried about a weak dollar vs. the euro, softness in the housing and auto sectors, and falling consumer confidence. "I do see possibility of a fairly quick reversal from something not expected because complacency is so very high."

On Wednesday, the U.S. durable goods bounce in March for both orders and shipments were good news for the second quarter and economy, says Action Economics, but shipments of both aircraft and ex-air nondefense capital equipment underperformed for March.

U.S. new home sales rebounded 2.6% to a 858,000 pace in March, after big declines in February and January knocked sales to their slowest pace in about 7 years. "The rebound wasn't as strong as we expected, though the data do suggest much of the weakness in January and February was weather related," says Action Economics.

And the Fed's Beige Book reiterated that most districts expanded at a moderate pace and that overall prices remained generally stable. "Modest growth coupled with tighter labor markets and higher input prices, along with slow auto and housing sectors did not come as much of a surprise to most investors tracking the economy," says Action Economics.

Among the companies reporting earnings, (AMZN) surged 27% after the online retailer posted higher earnings on a 32% sales rise. Boeing (BA) and PepsiCo (PEP) also reported stronger-than-expected earnings.

In tech, Sun Microsystems (SUNW) posted 2 cents in EPS on a 3.3% revenue rise, and says it sees a fourth-quarter sequential revenue rise of 15%-18%. Its shares fell nearly 11%.

In deal news, a consortium of banks led by Royal Bank of Scotland took a shot at breaking up ABN Amro Holding's (ABN) agreed sale to Barclays PLC (BCS) by making a contingent offer valued at about $103.75 billion, higher than Barclays' offer, according to The Wall Street Journal.

In the energy markets, June NYMEX crude oil spiked $1.22 to $65.80 a barrel after the inventory report. Crude stocks rose 2.1 million barrels, vs. expectations for a 1.0 million barrel decline. Meanwhile, gasoline stocks, seen down 500,000 barrels, actually fell 2.8 million barrels, while distillate supplies were flat vs. expectations for a 500,000 barrel rise, reports Action Economics.

European stock markets moved higher Wednesday. In London, the FTSE-100 index rose 0.5% to 6,461.9. Germany's DAX index was up 1% to 7,343.08. In Paris, the CAC 40 index jumped 1.04% to 5,947.33.

Most Asian markets lost ground. In Japan, the Nikkei 225 index fell 1.24% to 17,236.16. In Hong Kong, the Hang Seng index lost 0.18% to 20,536.78. But China's stocks pushed higher: The Shanghai Composite Index added 0.63% to 3,743.96, while the CSI 300 index edged up 0.09% to 3,448.28.

Treasury Market

Treasury yields moved up as the strong durable goods report and the Beige Book survey offset the weak new home sales data. The 10-year yield ticked up to 4.646%.

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