In a year full of market milestones, Wall Street crushed a couple of more Friday, lifting the Dow Jones industrial average past the 18,000-point mark for the first time and delivering the Standard & Poor’s 500 index its second record-high close in two days.
Investors welcomed the latest encouraging news on the economy, as the government said the U.S. grew at the fastest pace in more than a decade in the third quarter. The economic report card raised expectations for greater demand for fuel, driving oil prices higher and giving some respite to energy stocks, which have been hammered in concert with the slide in oil prices this year.
The rally gave the Dow and the S&P 500 their fifth consecutive gain. The indexes have recovered the last of the ground they lost in an early-December slump. It also marked the 51st all-time high for the S&P 500 and the 36th for the Dow this year, according to S&P Dow Jones Indices.
“This is going to end up being a bit better of a year for stocks and bonds than most people thought coming in,” said Bob Doll, chief equity strategist at Nuveen Asset Management. “The economy caught some steam, and it’s able to stand up with its own two feet.”
Despite weak growth overseas, geopolitical troubles and other concerns, investors repeatedly have bet on the U.S. economy and corporate earnings growth this year, pushing stock prices higher.
The market has been going steadily higher for the last two weeks after hitting a recent low of 17,069 on Dec. 16, as traders worried about plunging oil prices and a sharp drop in Russia’s currency. Investors have been encouraged by signs of strength in the U.S. economy and reassurances that the Federal Reserve won’t raise interest rates soon. Those trends bode well for the bull market run, which is on track to mark its sixth year in March.
And yet, the indices’ new heights have made the market more expensive. At their current price, investors are paying $17.60 for every $1 in earnings for companies in the S&P 500. That’s above the long-term average price-to-earnings ratio of $16.
Even so, stocks are not overvalued, said Cameron Hinds, regional chief investment officer at Wells Fargo Private Bank.
“You have to understand that U.S. economic output is at an all-time high, and corporate profits are at an all-time high,” Hinds said. “Bull markets typically don’t die purely of old age, they tend to die of recessions and overvaluation and perhaps policy mistakes, and we don’t see any of those on the horizon.”
All told, the Dow gained 64.73 points to 18,024.17. That’s up 0.4 percent from its previous record close Monday. The latest close is the Dow’s second 1,000-point milestone this year after closing above 17,000 for the first time in July.
The S&P 500 rose 3.63 points to 2,082.17. That’s a gain of 0.2 percent from its own all-time record recorded a day earlier.
The Nasdaq composite fell 16 points, or 0.3 percent, to 4,765.42.
The S&P 500 is up 12.7 percent this year, while the Dow has gained 8.7 percent. The Dow, which has just 30 stocks, has been held back by a slump in Chevron, as the price of oil collapsed, and by a 14 percent drop in IBM.
