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Dow 9000: What Does it Mean, and Can It Last?

Published: Thursday, 23 Jul 2009 | 8:57 PM ET

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By: Reuters

U.S. stocks surged on Thursday, driving the Dow industrials above the key 9,000 mark for the first time since January, as strong corporate profits and rebounding home sales spurred optimism about the economy.

Henny Ray Abrams / AP

But what does Dow 9,000 mean? And for that matter, given the weaker-than-expected late earnings Thursday, can it last?

CNBC took a look at those questions and more on a special, "CNBC Special Report Dow 9,000: The Summer Rally," Thursday tonight. See the videos below for more.

The broad-based rally helped all 10 of the S&P 500's benchmark sectors finish the day in positive territory. Even so, stock index futures dropped in late trading, suggesting Wall Street might hit a roadblock on Friday after Microsoft [MSFT Loading... () ], Amazon [AMZN Loading... () ], and American Express [AXP Loading... () ] posted disappointing quarterly results after the bell, sending their stocks lower.

Their reports provided a sharp contrast to robust results that diversified manufacturer 3M [MMM Loading... () ] and telecommunications company AT&T [ATT Loading... () ] reported before the bell, giving the broader market a strong start on the day.

Gains continued as data showed U.S. existing home sales rose in June—the first time since 2004 that the measure has risen three months in a row. The Dow Jones U.S. home construction index jumped 4.9 percent. The Nasdaq registered its 12th straight day of gains, its longest winning streak since 1992.

"What I like about the rally that we've seen so far is the breadth of it. It's not really confined to a single sector. It's broadly spread. That gives me confidence,'' said John Coyne, president of Philadelphia-based Brinker Capital, with $8 billion under management. "It's been a wonderful run-up here. It's certainly helping to restore investor confidence, given the trauma that people went through.''

The Dow Jones industrial average jumped 188.03 points, or 2.12 percent, to end at 9,069.29 — its highest close since November 2008. It was the Dow's first close above 9,000 since January 2009.

The Standard & Poor's 500 Index gained 22.22 points, or 2.33 percent, to 976.29. The Nasdaq Composite Index climbed 47.22 points, or 2.45 percent, to 1,973.60.

The string of good news helped the S&P 500 punch through a critical technical resistance level at 960, sparking a rally that lifted the benchmark index to 979.42 — its highest intraday level in eight months.

That breakout, according to some analysts, was an indication that the S&P 500 could take aim at the 1,000 mark. The S&P 500 is now up 44.3 percent since its 12-year closing low on March 9. But it's still 37.6 percent below its record closing high of 1,565.15 in October 2007.

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For the year, the Nasdaq is up 25 percent, while the blue-chip Dow average is up 3.34 percent and the S&P 500 is up 8.09 percent.

Microsoft, Amazon and Amex Sink Late

After the bell, shares of Microsoft, a tech bellwether and a Dow component, fell about 8 percent to $23.60 from its Nasdaq close at $25.56. During the regular session, Microsoft's stock climbed 3.1 percent ahead of the results.

Shares of Web retailer Amazon.com lost 7.7 percent to $86.60 in extended-hours trading, down from their Nasdaq close at $93.87. During regular trading, Amazon's shares rose 5.7 percent before the earnings were released.

Pros Say: S&P to Peak at 1000-1100

The quarterly revenues of both Microsoft and Amazon.com missed forecasts.

American Express, a credit card company and a Dow component, posted a lower quarterly profit, hurt by weakness in card member spending, record credit losses, restructuring charges and repayment of government funds.

After the bell, American Express shares slid nearly 5 percent to $28.07 from a New York Stock Exchange close at $29.45. In regular trading, the stock was up 2.4 percent.

Post-It Note: 3M and eBay Fly

During the regular session, 3M's stock rose 7.4 percent to $69.43 and contributed the most to the Dow's gain after the diversified manufacturer's profit handily beat analysts' expectations, and the company lifted its revenue outlook for 2009.

Blue-chip AT&T's stock gained 2.6 percent to $25.48 after it reported a smaller-than-expected drop in quarterly profit as strong sales of Apple's [AAPL Loading... () ] iPhone helped increase wireless subscriber growth.

Market Has Another 10-15% Upside: Strategist

Among the Nasdaq's major advancers was eBay [EBAY Loading... () ], whose second-quarter results beat Wall Street's expectations. The online marketplace's stock shot up 10.6 percent to $21.52.

Only three of the Dow's 30 components ended lower, including McDonald's [MCD Loading... () ]. The hamburger chain's stock fell 4.6 percent to $56.09 after it posted lower-than-expected June same-store sales and its quarterly profit matched Wall Street's forecasts.

Elsewhere, shares of Moody's [MCO Loading... () ] fell 3.8 percent to $25.52 following news that Warren Buffett's Berkshire Hathaway [BRK Loading... () ] reduced its stake in the credit ratings provider.

Before the opening bell, U.S. government data showed claims for jobless benefits rose last week, roughly in line with expectations, while continuing claims declined.

Volume was moderate on the New York Stock Exchange, with 1.40 billion shares changing hands, below last year's estimated daily average of 1.49 billion. On the Nasdaq, about 3.01 billion shares traded, above last year's daily average of 2.28 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of more than 5 to 1, while on the Nasdaq, about seven stocks rose for every two that fell.

Topics:Dow Jones Industrial Average | Earnings | Stock Market