Dow over 11,000; first time since '01

NEW YORK -- Wall Street may have kicked off the new year by catapulting stocks to multiyear highs, but savvy investors are already wondering when this party will be over.

For the first time since before the Sept. 11, 2001, terrorist attacks, the Dow Jones industrial average topped 11,000 Monday following a five-day rally that has sent stocks soaring so far in 2006.

When the Dow last finished above that milestone -- on June 7, 2001, at 11,090.74 -- it was off its record highs and the high-tech boom was on the wane, but many investors still hoped for a return to the unprecedented growth of the 1990s. These days, traders are much more cautious about the barrage of hurdles standing in their way: energy prices, inflation, interest rates, consumer spending and corporate earnings. And so it's taken more than 4 1/2 years for the Dow to reclaim 11,000.

At the close of trading Monday, the average of 30 blue-chip stocks ended the session up 52.59, or 0.48 percent, at 11,011.90.

"Dow 11,000 is just a number," said David Bianco, chief U.S. equity strategist for UBS. "But as wacky as it is of an index, it does a pretty good job as an indicator."

The Dow, which flirted with 11,000 in late November, was pushed over the line Monday largely by shares of General Motors, which rose nearly 8 percent after receiving a rare bit of positive news: A Goldman Sachs analyst raised his rating on the stock.

The Dow's advance has been building since last Tuesday, when the Federal Reserve's minutes of its December meeting signaled to many that the Fed would raise rates just one or two more times in the next few months.

"The catalyst was the Fed minutes," said Jim Paulsen, chief investment strategist for Wells Capital in Minneapolis. "It's not the force that did it. It is the catalyst."

The Dow first broke through the 11,000 barrier in May 1999.

Art Hogan, chief investment strategist at Jefferies & Co., said heightened clarity about the Fed's rate tightening, stabilizing oil prices and new investment money from 401(k) and pension funds have contributed to the market's gains in the new year.

"We probably can hold onto it," he said of the 2006 rally. "If companies can continue to weather this energy surge, operate in a higher interest rate environment and create jobs, the market should be able to continue this rise."

Still, the market faces tests in the days ahead -- key economic data on retail sales and wholesale prices later this week, as well as the upcoming fourth-quarter earnings season. Investors got their first whiff of earnings from a profit shortfall at aluminum producer Alcoa Inc. after the close.

Broader stock indicators were also at multiyear highs Monday. The Standard & Poor's 500 index rose 4.70, or 0.37 percent, to 1,290.15, a 4 1/2 year high; the Nasdaq composite index added 13.07, or 0.57 percent, to 2,318.69, its best close since Feb. 20, 2001.

Bonds fell slightly, with the yield on the 10-year Treasury note rising to 4.38 percent from 4.37 percent Friday. The dollar was higher against most major currencies, and gold prices edged upward.

Crude oil and natural gas futures retreated as mild winter weather pervaded the country. A barrel of light crude lost 71 cents to $63.50 on the New York Mercantile Exchange, where natural gas slipped 27.2 cents to $9.360 per 1,000 cubic feet.

The Dow came within 16 points of 11,000 last March 7, but fell back amid worries about inflation and higher oil prices, concerns that dogged the market for much of 2005.

The blue chips are still more than 6 percent below their all- time high of 11,722.98, reached Jan. 14, 2000, as the high-tech boom approached its peak, but they have recovered well from their low of 7,286.27, reached on Oct. 9, 2002, while the nation wrestled with an economic slowdown spurred by the attacks on the World Trade Center and Pentagon the year before.

Meanwhile, the S&P 500 is 15 percent off its all-time high from March 24, 2000, and the Nasdaq is 54 percent below its record high on March 10, 2000.

The markets rebounded strongly in 2003, then posted modest gains in 2004. The Dow ended 2005 with a slight loss while the other major indexes edged higher; every time stocks made a significant advance last year, concerns about the impact of record high oil and gasoline prices on inflation, consumer spending and corporate profits sent the market retreating.

But investors' mood changed radically last week with the release of minutes from the Fed's last policymaking meeting, during which the Open Market Committee signaled that its streak of rate hikes dating back to the summer of 2004 would soon end.

After the closing bell, Alcoa said its profit tumbled 16 percent because of lower production due to the hurricanes, strikes and restructuring moves. Alcoa -- the first of the largest U.S. companies to release quarterly results -- climbed 36 cents to close at $30.57 in the regular session but lost 87 cents in after-hours trading.

Goldman Sachs analysts on Monday raised GM one notch to "in- line," saying a bankruptcy filing at the world's biggest automaker is "very unlikely anytime soon."

JPMorgan Chase added 65 cents to finish at $40.67 after its upgrade to "neutral" by Prudential Equity Group, which issued an improved outlook for investment banking and asset management firms.

Texas Instruments Inc. said it is selling its sensors and controls business to Bain Capital LLC for $3 billion, and instead will shift its focus to digital signal processing and analog chips. Texas Instruments sank 27 cents to $34.18.

JPMorgan lowered International Business Machines Corp. one notch to "neutral," saying potential growth is already reflected in its stock price but that several risk factors in services and hardware are not yet being considered. IBM fell $1.22 to $83.73.

The broker also said it expects Amazon.com Inc.'s growth will lag the broader U.S. e-commerce market, and cut the stock to "underweight." Amazon.com dropped 79 cents to $47.08.

Advancing issues topped decliners by about 11 to 5 on the New York Stock Exchange, where consolidated volume of 2.39 billion shares lagged the 2.53 billion shares that changed hands Friday.

The Russell 2000 index of smaller companies advanced 6.85, or 0.98 percent, to 706.24, an all-time high and the first time the index has pierced the 700 level.

Overseas, Britain's FTSE 100 lost 0.01 percent, Germany's DAX index rose 0.01 percent, and France's CAC-40 was higher by 0.16 percent. Japan's stock market was closed Monday for a national holiday.

Contributing: Eric Dash, New York Times News Service

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