Story URL:
Story Retrieval Date: 4/17/2015 11:25:40 AM CST

Top Stories

Jackie Zimmermann/MEDILL


Dow closes above 16000 for the first time as Yellen sails through Senate committee

by Jackie Zimmermann
Nov 21, 2013

The Dow Jones Industrial Average closed above 16,000 for the first time, driven by the Senate Banking Committee’s approval of Janet Yellen for Federal Reserve Chairman and lower-than-expected jobless claims. Investor confidence reversed from Wednesday, when the release of the Federal Reserve’s policy meeting minutes caused markets to drop.

“I think people realized that selling was overdone yesterday,” said Brian Reynolds, chief market strategist with Rosenblatt Securities Inc. “Every quantitative easing we’ve had has resulted in a brief, small selloff in the stock market because people are so scared of it.”

The Dow Jones Industrial Average rose 109 points, or 0.6 percent, to close at 16009.99.

The S&P 500 and the Nasdaq Composite Index also rose, with the S&P 500 Index closing at 1795.85, up 0.8 percent but still shy of its all-time high of 1798.18 reached Nov. 15, 2013. The Nasdaq Composite Index closing at 3969.15, up 1.22 percent.

Additionally, the U.S. Department of Labor reported that 323,000 Americans applied for unemployment benefits for the first time, down 6 percent from the previous week’s revised 344,000. The report beat the 335,000 estimate of analysts surveyed by Bloomberg L.P.

“If you look at the trend, [jobless claims have] been trending down,” said Reynolds. The report shows that the economy is not getting any worse, he continued. “It doesn’t mean it's getting better, but things are not worsening.”

Alan Knuckman, senior market analyst at Trading Advantage, said that barring any major surprises in employment indicators, the market is going to continue its upward trend. “[Price-to-earnings] ratios are at historically modest levels,” he continued. “Even though the market is making new highs, the earnings justify it.”

The P/E ratio for the S&P 500 is currently 16.98, compared with its historical average of 15.16.

The yield on the benchmark 10-year Treasury note closed at 2.78 percent, only slightly lower than yesterday’s close of 2.8 percent, but well above last Thursday’s 2.69 percent.

Knuckman said the bounce in Treasury yields is rooted in the fact that “we were at all-time historical lows, and we had to bounce back up.”

The 10-year Treasury yield hit an all-time low of 1.63 percent on Sept. 28, 2012.

Reynolds also said rising interest rates should not be viewed as a harbinger for stock market volatility.

As yields go up, they create brief panicky selloffs, but the overall stock market rises because the overall economic activity is getting better, Reynolds said.

“We are in the midst of a credit boom,” he continued. Historically speaking, “the best stock market returns in a credit boom come after yields go up.”

The most active companies on the New York Stock Exchange included Micron Technology Inc., whose shares rose 6.28 percent after David Einhorn, president of Greenlight Capital Inc., recommended that investors buy shares of the company during the Robin Hood Investors Conference in New York. The stock closed at $19.98.

Intel Corp shares also rose nearly 3 percent after announcing increased access to its manufacturing plants for other chipmakers. The stock closed at $25.22.