More Milestones (Re)taken

In October, the Dow crossed 10,000 on its way up from the bear market lows.  It was hardly a case for celebration.  Now, about six months later, the Dow is 1,000 points higher.  Other major indices also crossed milestones of their own: S&P 500 is now above 1,200 and Nasdaq is over 2,500.

Again, while noteworthy, these “accomplishments” are really not that important.  Dow Jones first crossed 11,000 in 1999.  S&P 500 was at 1,200 level in 1998.  Nasdaq traded at 2,500 in 1999.  So while we made excellent progress from the market lows of March 2009, we are still at the levels of 11-12 years ago.

The economic news continues to get better.    Here are some of the highlights:

– Factory orders rose 0.6% in February.
– Manufacturing index is at 58.8, indicating expansion.
– Fewer Americans are filing  jobless claims.
– Auto and retail sales are rising. 
– Inflation remains low at around 1% annual rate.
– TARP funds are being repaid at a much higher than expected rate.  It is now estimated that TARP program cost will be $89 billion, down from $250 estimate one year ago.
– There is evidence of economic recovery abroad.  For example, Chinese GDP rose by 11.9% in the first quarter.

Most importantly for the equities, the first quarter earnings season is off to a good start with excellent reports by Intel and JP Morgan.  While one can argue that at least some of these news are already incorporated into stock prices, and a correction similar to the one in January can happen, the longer-term environment remains benign.