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Stock index ends week rolling on a hot streak

Sat., Jan. 26, 2013, midnight

Trader Peter Tuchman, center, works on the floor of the New York Stock Exchange on Friday. (Associated Press)
Trader Peter Tuchman, center, works on the floor of the New York Stock Exchange on Friday. (Associated Press)

NEW YORK – Passing another milestone on the nation’s long journey back from the Great Recession, the Standard and Poor’s 500 index closed above 1,500 for the first time in more than five years Friday after a wave of good earnings reports.

It took scores of incremental gains, several stalled rallies and a few sickening falls, but the widely watched S&P, one of the broadest measures of the American stock market, finished at 1,502.96, up 8.14 points. The index had not closed above 1,500 since December 2007, the start of the worst economic downturn since the 1930s.

The news came on top of other hopeful signs that the economy is slowly recovering. Housing is rebounding. Companies are hiring again, albeit slowly, and their earnings, a big driver of stock prices, are at record levels.

“The bottom line is that corporate America is doing exceptionally well,” said Joe Tanious, a global market strategist at JPMorgan.

The breakthrough happened on an eighth straight daily gain for stocks, itself a remarkable performance. That is the longest winning streak since November 2004.

Stocks have surged this month, with the S&P advancing 5.4 percent. It jumped at the start of the year when lawmakers reached a last-minute deal to avoid the “fiscal cliff.” Signs that Europe has avoided financial collapse also helped.

Stocks fell sharply during the Great Recession. By March 2009, the S&P was 57 percent below its October 2007 peak, a harrowing plunge that scarred a generation of small investors and, some Wall Street experts believe, will keep them away from stocks for years to come.

Since that fall, the market has climbed sharply, though it has endured several big declines. In May 2010, a trading glitch set off a so-called flash crash that sent stocks plummeting. And in August 2011, stocks gyrated like a roller coaster for several days as fears mounted that the U.S. would default on its debts.

On Friday, stocks were helped by earnings from two big companies. Procter & Gamble, the world’s largest consumer products maker, rose $2.83 to $73.25 after reporting that its quarterly income more than doubled. P&G also raised its profit forecast for its full fiscal year. Starbucks climbed $2.24 to $56.81 after reporting a 13 percent increase in profits.

The Dow Jones industrial average closed at 13,895.98, up 70.65 points. The Dow is up 6 percent on the year.

The Nasdaq composite gained 19.33 points to 3,149.71.

The Dow is now just 268 points below its record high of 14,165, reached on Oct. 9, 2007, two months before the recession began. The Dow has more than doubled since its recession low of 6,547 on March 9, 2009.

The S&P 500 is 62 points shy of its record of 1,565, reached on the same day the Dow hit its peak. The S&P has also more than doubled from its low of 676, which happened on the same day the Dow bottomed out in 2009.

JPMorgan’s Tanious expects stocks to go even higher. He says corporate earnings should grow at about 5 percent over the next year or two, and stock valuations will rise. Currently, the S&P 500 is trading at an average price-to-earnings ratio of 14, below an average of 15.1 for the last decade, according to FactSet data.

Not everyone on Wall Street thought the S&P milestone was worth celebrating. Some noted the stock market is more a reflection of how traders feel than a reflection of underlying fundamentals.

“It’s not a landmark that we really follow or that we really care about,” said Derrick Irwin, portfolio manager for Wells Fargo Advantage Funds. “Focusing on the benchmarks can end up shooting you in the foot, as we’ve seen.”


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