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KAI RYSSDAL: It took a stretch of about 10 months last year for the Dow Jones Industrial Average to make the trip from 11,000 to 12,000. From there, it only took six months to reach the 13,000 level in April. Today, just 57 trading days later, Wall Street’s best-known indicator topped 14,000 for the first time. Didn’t quite close there but the blue chips were above it for most of the day. A relatively tame inflation report and some encouraging profit reports added to the momentum today. While optimism does reign on Wall Street, there are some more questions today about how long the rally might last. Here’s our Senior Business Correspondent Bob Moon.
Bob Moon: On a day for popping champagne corks, we figured we’d hear mostly giddy words from Wall Street about where the market’s headed. So instead we went to Cleveland and spoke to a private economist. Ken Mayland heads Clearview Economics. But today even he sounded like a giddy stock broker.
Ken MAYLAND: I think this market is still cheap. And the market being cheap explains why merger and acquisition activity is so strong. Because fundamentally, this market is cheap. Companies are buying back their stock because the market is cheap, and they have confidence in the future.
But many are betting the rally can’t last. The Dow and S&P 500 may be breaking records, but there’s also a record level of investors taking so-called short positions, essentially betting that prices will fall.
Jeffries & Company market strategist Art Hogan was taking a cautious approach in the face of the Dow’s latest milestone.
Art HOGAN: We never go through an extended period of time where we don’t have shocks to the system. We’re going to get some bumps in the road. It’s never a straight line up, there’s always some volatility. And I think we should expect that in the future.
Barring the unexpected, though, economist Ken Mayland is ever the optimist. He points to today’s tame inflation news. which makes the Fed less likely to raise interest rates right away. He even sees a silver lining in those costs that DID go up. He thinks rising prices for home appliances, furniture and lumber could signal a stabilizing housing market.
In Los Angeles, I’m Bob Moon for Marketplace.
Ryssdal: Just to close the loop on that inflation report that Bob was talking about . . . the Producer Price Index, which is wholesale inflation, dropped 0.2 percent last month.
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