P

R
O
O
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By E.S. BROWNING
The Dow Jones Industrial Average
pushed above 11000 for the first time since
June 2001, continuing one of the strongest
New Years rallies in two decades.
Spurred by a Goldman Sachs analysts
positive comment about beleaguered
General Motors Corp., a pullback in oil
prices andabove allcontinuing talk
that the Federal Reserve soon will stop
raising short-term interest rates, the Dow
Jones industrials rose 52.59 points, or
0.48%, to 11011.90. The spreading sense
that the economy remains healthy and
interest rates are near their peak indi-
cated that investors are moving beyond
their memories of the 2000 tech-stock
collapse and the 2001 terrorist attacks.
All three major indexesthe Dow
industrials, the Nasdaq Composite Index
and the Standard & Poors 500-stock
indexhave risen on each of the years
first five trading days, something that
hasnt happened since 1987. All three now
stand at 4-year highs.
Analysts applauded the markets new
strength after a downbeat end to 2005 that
left the Dow with a decline for the year of
slightly less than 1%. Historically,
Januarys performance has been a strong
bellwether for the rest of the year. And
this years gains reflect a growing belief
that the Fed will pilot the nations
economy to a soft landing: a slowdown
that manages to keep inflation under
control while also avoiding a recession.
Though the years strong start sparked
hopes for lasting gains, the echo of 1987
led some market watchers to recall that
stocks suffered a meltdown in October of
that year, taking their sharpest short-term
plunge since 1929. Skeptics also noted that
the current bull market, which began in
2002, is more than three years old
approaching elderly, as bulls goand
lately has shown signs of fatigue. They
warned that for all the days excitement,
stocks still could be in line for a pullback
as the year wears on.
Professional traders said their celebra-
tion was subdued and short-livedlimited
to a few whoops of joy, rather than
glasses of Champagne. They have seen
the Dow break through 11000 and finish
above it on 19 previous occasions, starting
on May 3, 1999, only to slide back below
that level. They are waiting to see
whether this move will prove more
lasting.
But for the day, the optimists held the
floor. The Dow now stands just 6% below
its record 11722.98, hit on Jan. 14, 2000. It
is up 2.8% so far this year. Corporate
profits remain strong. Minutes of the
Feds December policy meeting, released
Jan. 3, indicated that Fed officials are
getting closer to an end to their cycle of
interest-rate increases, which began more
than 18 months ago. If the Fed stops
raising rates without triggering a reces-
sion, many investors believe that will
remove the main impediment to further
stock-price gains.
History shows that, in years when the
Dow industrials finish higher in the first
five days, they are likely to rise over the
rest of the yearand have a better than
50% chance of turning in an above-
average gain. The widespread hope this
year is that individual investors, still
licking their wounds from the bear market
of 2000-2002, may notice the big round
number 11000 and seize on it as a reason
to put more money into stocks.
If we can hold this beachhead, it could
create a self-sustaining cycle of money
coming back into the market, said
Darren Kavesh, chief investment officer
at money-management firm Bowling Port-
folio Management in Cincinnati. We
have this psychologically inculcated thing
now where everybody has grown to
distrust stocks.
With gains from real-estate invest-
ments beginning to cool, some people may
be looking for a new place to put their
money, he said. If the market can avoid
falling back below 11000, those people
could decide to jump in. If the gains
continue, hedge funds, big pools of invest-
ment capital that cater to pension funds,
foundations and the wealthy, could also
jump on board.
On the stock-trading desk at New York
brokerage firm Bear Stearns, however,
reaction was muted. For most of us here,
it is not all that significant, said trader
Michael Driscoll. People are mildly posi-
tive on what they have seen so far in 2006.
Volumes are up. If we are closer to the
end of the interest-rate hikes than we are
to the beginning, that is a positive,
because an end to rate increases takes
some pressure off of businesses and
consumers alike, he said.
Maybe the market will grind its way a
little higher as the year wears on, said
David Briggs, head of stock trading at
mutual-fund group Federated Investors in
Pittsburgh. But Mr. Briggs said he
expects that, once the January excitement
quiets, we are going to get much more of
the same thing we have had for the past
two years. We will get movement in some
sectors but I dont think the overall aver-
ages will move very much. As long as oil
supplies are assured and the threat of
terrorism doesnt increase seriously, he
said, he doesnt expect a sharp decline in
the indexes, but it is hard for me to think
of something that will make the market
gap up 20%.
Further evidence of the muted reaction
came from the gold market. Gold, tradi-
tionally considered a haven in times of
economic worry, hit its highest New York
close in nearly 25 years, rising $9.40 an
ounce to $549.10. It is up 6% so far this
year.
One reason stock investors arent
euphoric about Dow 11000 is that other
major indexes arent nearing records. The
S&P 500 and the Nasdaq composite both
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PAGE ONE
Dow Industrials End Above 11000
As Stocks Extend New Years Rally
TUESDAY, JANUARY 10, 2006 2006 Dow Jones &Company, Inc. All Rights Reserved.
THEWALLSTREETJOURNAL.
Source: WSJ Market Data Group
99 2000 01 02 03 04 06
Yesterday: 11011.90
05
7000
8000
9000
10000
11000
12000
Back on Top
The Dow Jones Industrial Average crossed
the 11000 mark for the 20th time,
going up, yesterday.
were more exposed to technology stocks
than was the Dow, and thus fell harder
during the bear market. Although they
both have risen more than the Dow so far
this year, the S&P remains 15.5% below
its record, hit in March 2000, and the
Nasdaq, dominated by tech stocks, is 54%
below its record, which also dates from
March 2000.
Two other much-watched indexes, on
the other hand, did hit records yesterday:
the Russell 2000 small-stock index and the
S&P index of midsize stocks.
Stocks commonly begin the year with
gains, as new money flows into retire-
ment funds and is invested in stocks. The
big question on investors minds now is
whether the gains can be sustained.
Valuations of U.S. stocks are still
attractive, and our stock markets may
receive a boost when the Feds current
tightening cycle is finished, wrote
Benjamin Pace, chief investment officer
at Deutsche Banks private-banking arm,
in a letter to clients this month. This is
not to suggest that the U.S. markets will
be smooth sailing. There are a number of
obstacles that may suddenly appear on
the horizon. Mr. Pace said those include
the delayed effects on consumers and
companies of the Feds interest-rate
increases, the risk that the Fed will raise
rates too high and stifle the economy,
and the opposite riskthat inflation will
become a problem.
While it isnt time to move away from
stocks, investors should be prepared to
be nimble, Mr. Pace warned.
Mr. Kavesh of Bowling Portfolio
Management said that skepticism about
the Dows latest milestone could be a
positive sign. It means, he said, that
many people still are holding money on
the sidelines. If the Dow manages to stay
above 11000, he said, optimism will
spread, and it could pull some money
out of real estate and other alternative
investments.
Source: WSJ Market Data Group
Investors Have 11,000 Smiles
DJ Industrial Avg.
DJ Transportation Avg.
DJ Utility Avg.
S&P 500
Nasdaq Composite
S&P 600
Russell 2000
Crude oil (per barrel)
Gold (per troy oz.)
10-year Treasury yield
11014.69
3696.59
316.34
1354.63
2535.58
173.26
433.28
$18.85
$286.6
5.35%
11011.90
4238.34
413.21
1290.15
2318.69
366.32
706.24
$63.50
$549.1
4.373%
MAY 3, 1999 JAN. 9, 2006
May 3, 1999
March 29, 1999
April 6, 1998
July 16, 1997
Feb. 13, 1997
Oct. 14, 1996
Nov. 21, 1995
Feb. 23, 1995
April 17, 1991
Jan. 8, 1987
Nov. 14, 1972
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
DJ Industrial Avg.
Nasdaq Composite
Nasdaq 100
Russell 2000
S&P 500
S&P SmallCap 600
S&P Midcap
DJ Wilshire 5000
11722.98
5048.62
4704.73
706.24
1527.46
366.32
768.71
14751.64
11011.90
2318.69
1741.90
706.24
1290.15
366.32
768.71
12963.00
711.08
2,729.93
2,962.83

237.31

1,788.64
6
118
170

18

14
% Jan. 14, 2000
March 10, 2000
March 27, 2000
Yesterday
March 24, 2000
Yesterday
Yesterday
March 24, 2000
ALL-TIME
CLOSING HIGH
DATE OF ALL-TIME
CLOSING HIGH
YESTERDAYS
CLOSE
CHANGE NEEDED TO
REACH HIGH IN:
POINTS PERCENTAGE
1,000-Point Marks
When the Dow first passed
other milestones:
Then & Now
How yesterday compares with the first
time the Dow crossed 11000:
Where the Dow Jones Industrial Average and other major indexes stand relative to their highs: