MONEY milestone

Forget Dow 17,000. Here’s the Real Number to Get Excited About

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Brendan McDermid

This morning the Dow ticked past 17,000 (again), and the stock market is closing in on some other important milestones too. Here's what to know about the history-making numbers.

At the market’s open today, a few more zeros turned over on the Dow’s odometer, and the index is likely to be bouncing around 17,000 all day. Sure, the number itself doesn’t matter much—it’s not like you get a bonus added to your retirement every time you hit a round figure. But it is a chance to pause and look at just how far the market has come in this bull market, and what that might mean about where it’s going. It’s also a moment to look at some other milestones that may be coming up soon. (Spoiler: Keep your eye on the Nasdaq.

Dow 17,000

In some ways what’s notable about the Dow reaching 17,000 isn’t that it’s gained a such a lofty height, but that it could be stalled here for some time. The Dow closed above14,000 in February 2013, and hit 14,253 a few weeks later in March. While not a round number, the latter milestone was important because it represented a new all time high. The previous one, hit in October 2007, had stood as a reminder of the myopia on the eve of the financial crisis. In any case, since then, milestones have tumbled quickly. The index hit 15,000 by May 2013 and 16,000 by November. After such a rapid run up, the Dow took almost eight months to reach the next round-number close, 17,000 on July 3, where it’s now again hovering. Given that some of our brightest minds are puzzling over why stocks have come thus far, and whether their current prices relative to earnings are justified, perhaps we’ll see16,000 again before we see 18,000.

S&P 500 2,000

When the Dow hit 17,000 earlier this year, it seemed like the S&P 500 would follow with a milestone of its own, hitting 2,000 for the first time. As it turned out the S&P topped out at 1,987 on July 23. In some ways, the S&P’s thriple-zero achievement would be more historic. After all, the S&P will have doubled to get to 2,000 from 1,000, which it first hit in February 1998. The Dow’s latest milestone represents a gain of only about 6%.

And of course the S&P is a better stock market gauge than the Dow. The Dow, founded in 1896, represents just 30 of the nation’s largest companies. The S&P, which has existed in its current form since the ’50s, covers 500. It also weights companies based on their relative values, as opposed to the Dow, which relies on stock prices – an arbitrary distinction that happened to be convenient for nineteenth-century stock nerds. More important, people actually own the S&P 500, in the form index mutual funds and ETFs which track the index. So why do we still pay attention to the Dow? Just because we always have. When you’re talking about milestones, history counts…

Nasdaq Composite 5048

The tech-heavy Nasdaq recently closed at 4,500. If there’s one milestone worth caring about, it could be when (if?!) this index reaches 5,000, or more precisely 5,048.62. That was its all-time high, hit in March 2000. From there the Nasdaq fell steeply – declining to just above 1,100 in 2002. So it’s been a pretty steep march back, for which you can thank juggernauts like Google GOOGLE INC. GOOGL -0.5022% , which has returned more than 1,000% since its August 2004 initial public offering and Apple APPLE INC. AAPL 0.0099% which has returned 4,500% over the same span. Of course, there are those who think we may be in the early stages of another tech bubble—even Fed chair Janet Yellen has raised an eyebrow over pricey social networking and biotech stocks. That said, those of us who can remember the euphoria of 1999 probably feel like investors are a little more wise this time around. Let’s hope so. The track record of more recent IPOs like coupon company Groupon GROUPON INC. GRPN -0.32% and game producer Zynga ZYNGA INC ZNGA -1.9231% , both trading at less than a third of their initial prices, suggest that investors can still muster some skepticism.

Apple $100

Earlier this week, Apple earned a wave of headlines when its shares hit $100, a record high, amid strong expectations for products like a larger iPhone and a possible smart watch. That’s good news for CEO Tim Cook who must try to fill the shoes of legendary founder Steve Jobs. And Wall Street analysts seem to think it can climb higher, predicting it will reach $105 over next 18 months, although they are a famously bullish crowd. One thing is for certain, as far as milestones go, this one’s pretty flimsy. While $100 has a nice ring to it, Apple’s shares would be worth about $700 if the company hadn’t undergone a 7 for 1 stock split in June.

MONEY stocks

Goldilocks Jobs Report Calms Down Wall Street’s Bears—For Now

The three bears discover goldilocks asleep in their bed they are not amused...
Chronicle—Alamy

While job growth was tepid in July, this was exactly what the markets needed to reverse Thursday's 317-point decline, as pressure on the Federal Reserve to raise rates subsides.

At first blush, today’s jobs report sure felt underwhelming. The Labor Department said that the economy created 209,000 new jobs in July, not the 233,000 that were expected.

Yet what seemed like disappointing results turned out to be exactly what Wall Street needed.

On the one hand, the economy still managed to produce more than 200,000 jobs in July, which marked the sixth consecutive month in which job creation topped that level. That hasn’t been seen since the late 1990s. “July’s payrolls report helps to confirm the sustainability of the strongest labor market expansion since 1997,” said Guy LeBas, chief fixed income strategist for Janney Montgomery Scott.

On the other hand, the labor market was just tepid enough to cool at least some of the hot debate about how the Federal Reserve needs to stop coddling an economy that’s starting to sizzle and hike rates soon.

Immediately after the jobs report was released Friday morning, investors took a deep breath and calmed down following Thursday’s 317-point drop in the Dow Jones Industrial Average.

Though it seemed as if the markets were headed for another triple-digit down day based on sentiment before the opening bell, the Dow and S&P 500 were relatively flat in early morning trading. By around 11:30 am, the Dow had fallen by around 50 points, but that was pretty much all the bulls could hope for:

^DJI Chart

^DJI data by YCharts

The real question is how long will the bears be kept at bay? A week from now, the government is set to release another batch of data detailing worker productivity and labor costs. And if there’s any whiff of inflation in those figures, the bears are likely to awake once more.

MONEY stocks

Friday the 13th Is a Lucky Day for Stocks, But Beware Next Friday

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History says it's unlikely that Jason will come after investors on Friday the 13th. Ronald Grant—Everett Collection

Historically, it’s so-called “Triple Witching” day, which comes next Friday, that really spooks the markets.

Calm down. Take a deep breath. Sure, the S&P 500 S&P 500 INDEX SPX 0.295% has suffered three straight down days. And today, Friday the 13th, is supposed to be the scariest day of the year.

But the stock market is by nature counterintuitive. Friday the 13th, as luck would have it, turns out to be a decent day to invest in equities: Since 1950, returns on Fridays the 13th have averaged 0.88%, more than twice the 0.34% average gain of trading days in general. And “the frequency of advance” is higher on Friday the 13th than on other days, says Sam Stovall, managing director for U.S. equity strategy at S&P Capital IQ. In other words, there’s a greater chance that the S&P 500 will post a positive gain on Friday the 13th (56%) than other days (52%).

That doesn’t mean today’s market performance will match the average, of course, or that the average will hold in the future. But the fact is, as Jeffrey Hirsch, editor in chief of The Stock Trader’s Almanac, has put it, “Friday the 13th has been erroneously associated with market crashes.”

In fact, there’s been only one significantly bad Friday the 13th in recent market history. That was October 13, 1989, the day of the so-called mini crash of ’89, when the S&P 500 lost around 6.1% of its value and the Dow Jones industrial average fell around 190 points (which back then amounted to a 6.9% drop). The losses were triggered in part by a crisis in the junk bond market.

On the other had, there’s actually good reason to be freaked out about next Friday, which is a so-called Triple Witching day on which contracts for stock options, index futures, and index options expire simultaneously. Four times a year, on the third Friday of March, June, September, and December, investors are forced to decide whether to roll over those contracts into new ones or to unwind their positions. As a result, on those days, and especially during the final hour of trading on those days, volatility tends to spike.

Even worse, in the week that follows each June’s Triple Witching Day, the Dow has lost ground in 21 of the past 24 years. Says Hirsh: “The weeks after Triple-Witching Day are horrendous.”

MONEY stocks

WATCH: Apple Splits Stock Seven Ways

Why did Apple do a 7:1 stock split? Maybe it's because the tech giant wants a spot on the Dow Jones Industrial Average.

TIME Markets

Markets Rally on News From the Fed

A transcript of the Federal Reserve’s last session quelled fears among investors that the central bank could soon raise interest rates

Stocks in the United States climbed Wednesday, building on recent gains as investors were reassured that the Federal Reserve won’t be raising interest rates any time soon. Policymakers agreed to scrap an a trigger that would have raised interest rates if unemployment fell to a certain point.

The Dow Jones Industrial Average rose 181.04 points to close at 16,437.18, for a gain of 1.11%. The S&P 500 climbed 20.22 points to 1,872.18 while the NASDAQ rocketed 70.91 points, or 1.72%, to close at 4,183.90.

More than two stocks increased in price for every one that dropped in the New York Stock Exchange, CNBC reports. The Nasdaq climbed into the positive for the year, reversing losses from his worst three-day performance since 2011.

[CNBC]

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