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Stocks Continue Dramatic Increase As Dow Jones Average Cracks 7000

By Jill Dutt
The Washington Post

The Dow Jones industrial average shattered the 7000 mark Thursday and Ralph J. Acampora could not contain himself.

"It's gonna hit 8250 by year-end," gushed the chief technical analyst for Prudential Securities Inc. "And that's subject to upward revision."

Acampora is one of Wall Street's fiercest raging bulls. A lot of people are listening to him and others like him now, as they pour billions upon billions of dollars into the U.S. stock market each month. As that money funnels in, the rise in stock prices becomes a self-fulfilling prophecy, a simple balance between supply and demand.

Demand for stocks is high. Supply isn't keeping up, especially with the dozens of corporate stock-buyback plans and mergers, so prices rise.

There are fundamental reasons why stocks are an attractive investment now, apart from the new cash inflows. Inflation is low, interest rates are stable, the economy continues expanding and corporate earnings are strong, all of which are positive for stocks. And for the past three years, most alternative investments have not been able to provide even half the return of U.S. stock investments.

Investors don't see those fertile conditions changing anytime soon, so they're sending the market even higher. The Dow rose 60.81 points Thursday to close at 7022.44, an 8.9 percent return since the start of the year. The Standard & Poor's 500 index also hit a new high, rising 9.05 to 811.82.

Bond prices supported the stock market's rise, as the price of the bellwether 30-year Treasury bond jumped more than a point, which reduced its yield to 6.62 percent from 6.70 percent on Wednesday.

It was only four months ago when the Dow crossed the 6000 mark, which it did much more nervously, taking a week to flirt with the threshold before closing a session above it. Analysts at that time were cautious about whether fourth-quarter corporate earnings would hold up. This week, flush with stronger-than-expected earnings reports and beating back an earlier drop in technology shares, the Dow just marched up 166.64 points and through 7000 with little hesitation.

"It's been an emotional market to say the least," said Joseph N. Cangemi, a New York Stock Exchange floor trader. "I wouldn't be surprised if the momentum carried us through 8000 or maybe 9000. By the year 2000 I might see 10,000 as a reasonable level for the Dow."

Acampora predicted back in June 1995 - when the Dow was at 4500 and many feared a crash - that the popular stock-market barometer would cross 7000 before 1998. He said he is barnstorming America, telling investors, "Don't get off this bandwagon. The ride isn't over."