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What keeps pushing the Dow higher?

Bob Moon Oct 15, 2009

What keeps pushing the Dow higher?

Bob Moon Oct 15, 2009


Kai Ryssdal: Here’s today’s Marketplace pop quiz:

With unemployment still rising and consumers still wondering if it’s safe to spend again, not to mention memories of the crash of last fall, what’s driving the Dow?

The blue chips are up 50 percent from the lows they hit back in March. They closed over 10,000 again today. So where’s the money coming from? Here’s our Senior Business Correspondent Bob Moon.

BOB MOON: Is this for real or just the giddy response of banks and other big-money investors on too much government medication?

Some market analysts say it’s easy for the Dow to climb the way it has when the government has injected the financial system with so much cheap money.

Richard Suttmeier is chief market strategist at ValuEngine.com.

RICHARD SUTTMEIER: Firms like Goldman Sachs and the hedge funds, they can just power the market higher. They have the performance benchmarks they have to make, so it’s really professional investors’ money that’s driving this market. The individuals are only involved if they have money in mutual funds.

Suttmeier points out trading volume has been relatively light. He contends that makes it easier for the big institutional investors to move the market in the direction they want.

Asset manager James Weiss says after the huge sell-off, the law of supply and demand meant prices had nowhere else to go but up.

JAMES WEISS: If, on any given day, there are 10,000 investors that want to buy the stock, and only 3,000 investors that want to sell it, the price of the stock has to go up.

Weiss says mom-and-pop investors will now need convincing they’re not buying in at the top.

But market strategist Richard Suttmeier says they don’t have the cash that the government keeps handing out to the bigger investors.

SUTTMEIER: It’s creating an asset bubble on speculation — speculation that the economy’s going to turn around and be a lot better, but I’m still seeing data that suggests that that’s wishful thinking.

Other market analysts argue the stock market is looking to the future and seems convinced a recovery is under way.

I’m Bob Moon for Marketplace.

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