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Dow Punches Through 13,000 Twice Today, But Settles Below the Mark

Jeff Ostrowski
The Palm Beach Post
February 21, 2012

Stocks briefly broke through a milestone today, then quickly retreated - a tepid run-up typical of the most subdued bull market in recent memory.

The Dow Jones industrial average crept above 13,000 before closing at 12,965.70, up 0.12 percent for the day.

For all the wrenching volatility of the past few years, stocks have proven remarkably resilient. The Dow has shaken off last summer's doldrums and now stands nearly double its March 2009 low.

But investors and market watchers haven't forgotten how quickly stocks can fall, and they still seem worried about all the bad news in the global economy - including rising oil prices, still-high unemployment and Europe's ongoing debt crisis.

"Everybody's waiting for the next shoe to drop," said Steven Pomeranz, a certified financial planner in Boca Raton. "Everybody is very edgy and very wary."

The Dow first broke through 13,000 in April 2007. Investors had failed to grasp the enormity of the coming mortgage meltdown, and the Dow rocketed past 14,000 in July 2007. Once the real estate bubble burst, the Dow plunged in 2008 and early 2009. The Dow hasn't been above 13,000 since May 2008.

The painful memories of the Great Recession have market observers voicing only cautious optimism.

"The economy is turning around," said Jim Smeenge, a financial adviser at Edward Jones in West Palm Beach. "While it's not perfect, it's not getting worse."

Among the imperfections are rising oil and near-record gold prices. Higher oil prices can slow economic growth by raising costs for consumers and businesses, while rising gold prices can be a symptom of economic uncertainty.

Crude-oil futures closed at $106.25 a barrel, up $2.65, and gold futures gained $22.60 to end at $1,758.50 an ounce.

"Oil can put a real damper on the economy," said Carl Domino, a money manager in Palm Beach. "There are a lot of reasons for stocks to go higher - low valuations, low interest rates and high corporate profits. But you've got to keep a close eye on the price of oil."

While the bull markets of the 1990s and the dot-com days were characterized by what Alan Greenspan famously labeled "irrational exuberance," today's bull market is a much calmer version.

"It's a whole new world now," said Corey Wagner, branch manager at Euro Pacific Capital in Boca Raton. "Everybody takes things with a grain of salt, as they should."

Even as the U.S. economy seems to be gaining strength, the nation's slow job growth has dominated Republican presidential debates, and Greek's debt crisis has dominated headlines.

Some investors see 13,000 as a signal that it's time to sell stocks. Richard Steinberg of Steinberg Global Asset Management in Boca Raton said he has sold some of his portfolio as the stock market has bounced back.

"It's a little too much too fast," Steinberg said. "When everybody is buying, we want to be more cautious."

If it holds, this new strain of pessimism should keep stocks from becoming overpriced, Pomeranz said.

"Generally, that's a good thing for the market," he said. "If you stop being worried, that means you think this time is different, and prices can't go lower."