NEW YORK – Judging by the stock market, you’d think the U.S. economy was back in party mode.
Stocks pushed back Friday toward levels they last saw long before the financial crisis. The Dow Jones industrial average, which has fallen only three days this month, was up 13 points in the afternoon.
Telecommunications and health care stocks rose the most. Apple, on the day customers lined up around the world to buy its iPhone 5, reached an all-time high of $705.07 before falling back to $702.
The Dow had a shot at closing above 13,600 for the first time since Dec. 10, 2007, nine months before the fall of Lehman Brothers investment bank. It has risen more than 1,200 points since the start of June.
The summer rally doesn’t mean the underlying economy is healed – far from it. It’s mostly the result of vows by the Federal Reserve and other central banks to help more.
“It’s just a big illusion,” said Bob Phillips, managing partner at Spectrum Management Group in Indianapolis. The economy, he said, is still a “no man’s land” plagued by high unemployment and slow growth.
Credit the Fed and other central banks. This week, the Bank of Japan agreed to buy more Japanese government bonds to jump-start the economy there. That followed similar announcements from the Fed last week and the European Central Bank before that.
But there’s only so much the Fed can do. It can’t fix the fiscal cliff – the higher taxes and government spending cuts that take effect next year unless Congress acts and could throw the economy back into recession.
Timothy Leach, wealth management chief investment officer for U.S. Bank in San Francisco, said central banks are buying time more than fixing underlying problems. “But at least they’re taking some of the pressure off,” he added, “allowing policymakers some additional time to try to achieve those real solutions.”