Dow Closes Above 13,000 For First Time

It looks like a cause for celebration: The Dow Jones industrial average surged from 12,000 to 13,000 in just six months. But appearances can be deceiving, and there may be more reason to worry rather than rejoice about Wall Street's latest accomplishment.

Stronger-than-expected profits from several large companies helped push the stock market to historic heights.

But Wall Street and Main Street appear to be headed in different directions, reports CBS News correspondent Anthony Mason. While the stock market has been racing ahead, the economy has been slowing down.

Housing is mired in a slump. Existing home sales plummeted more than 8 percent in March. The median price, now down to $217,000, has fallen for an unprecedented eight straight months, adds Mason.

Still, the stock market's best-known indicator surged past its latest milestone shortly after trading began Wednesday, and even made it past 13,100, rising as high as 13,107.45. It closed at 13,089.89, up 135.95 or 1.05 percent.

"I think we can expect continued progress, but I'm not sure how swift it will be," Michael Farr, chief investment officer at Farr, Miller & Washington, told CBS News.

The broader market shared in the rally. The Standard & Poor's 500 index rose 15.01, or 1.01 percent, to 1,495.42, after reaching 1,496.59, a 6 1/2-year high. The technology-dominated Nasdaq composite index advanced 23.35, or 0.92 percent, to 2,547.89, after hitting a six-year high of 2,551.39.

And the Russell 2000 index, which reflects the performance of smaller companies, also had a record close, rising 5.71, or 0.69 percent, to 832.07.

It took the Dow just 129 trading days, since Oct. 18, to make the trek from 12,000 to 13,000 — far less than the 7 1/2 years the blue chips took to go from 11,000 to 12,000. But the swiftness of this latest trip does recall the days of the dot-com boom, when the major indexes were soaring and it took the Dow a mere 24 days to barrel from 10,000 to 11,000.

The Dow climbed to a record this time as many of the country's biggest companies surpassed analysts' first-quarter earnings projections. Among those beating forecasts Wednesday: soft-drink maker PepsiCo Inc., materials manufacturer Corning Inc. and Dow component Boeing Co.

Wall Street got an additional lift from the Commerce Department's report on durable goods last month, which showed a gain in orders of business capital goods and reassured investors that demand for U.S. products remains strong. The department also reported that sales of new homes rebounded slightly in March.

About two-thirds of U.S. companies so far have reported earnings that were in line with or higher than analyst expectations, said Jim Herrick, director of equity trading at Baird & Co.

"We've had pockets of companies report better earnings, and in light of the Fed not appearing to raise rates anytime soon, that bodes well for the market," said Herrick. "Going forward, the market's going to be data-driven. The market's going to focus on economic data to get a hint about what the Fed will do in the latter half of the year."

Wednesday's advance gained even more momentum from the Federal Reserve's assessment that economic growth seemed moderate in much of the country. Inflation appeared tame, according to the Fed's Beige Book, which describes economic conditions in regions around the country and arrives two weeks before the central bank's next meeting.

Investors have been encouraged by stable earnings growth, which shows that U.S. companies are faring well despite a slow economy. A large reason why corporate growth has held up is strength in international sales; PepsiCo, for one, said Wednesday its overall profit rose 16 percent, despite a drop in operating profit at its North America unit.

Also giving exporters an advantage, the dollar is trading near historical lows versus the euro. The 13-nation currency rose as high as $1.3664 on Wednesday.

"International sales are a huge part of S&P 500 revenues, and this lower dollar makes these companies more competitive," said Scott Wren, equity strategist for A.G. Edwards & Sons. He said analysts estimate 30 to 40 percent of sales at S&P 500 companies come from countries outside the United States.

The biggest gainer in the 30 Dow companies was Alcoa Inc. The aluminum producer said Wednesday it's considering selling its packaging and consumer businesses, which account for about 10 percent of annual revenue. Alcoa rose $1.81, or 5.3 percent, to $35.76.

Nasdaq was lifted by Amazon.com, which reported late Tuesday that its first-quarter profit more than doubled, besting analysts' estimates. The Web retailer also boosted its revenue outlook for the year, reassuring investors that technology companies have the potential to keep posting profits. Amazon rose $12.06, or 27 percent, to $56.81.

The Dow was the first of the major indexes to recover from the stock market's prolonged slump in the early part of the decade. The S&P 500 has yet to reach its closing peak of 1,527.46, set in March 2000, and no one expects the Nasdaq to equal its record of 5,048.62, also reached in March 2000, anytime soon.

Wednesday's run-up helped buoy the major indexes gains for the year, sending the Dow, S&P and Nasdaq each up more than 5 percent.

The Dow's latest achievement did not come without setbacks and volatility — the index lost 416 points in a single session on Feb. 27 amid fears that the U.S. economy would fall into recession and that China's economy would slow as well. Wall Street has since had periodic shudders over signs that inflation might be getting out of hand — a trend that would lead the Fed to resume interest rate hikes — and over data showing weakness in the housing market.

Just two weeks ago, the Dow fell nearly 90 points after minutes from the last Fed meeting showed the central bank's level of concern about inflation.

Inflation could re-emerge as an obstacle to the stock market's uptrend if energy costs keep surging. On Wednesday, crude oil futures settled up $1.26 to $65.64 per barrel and gasoline futures rose to 8 1/2-month highs on the New York Mercantile Exchange, after the Energy Department reported a decline in U.S. gasoline inventories.

Bonds fell after the positive economic data and amid the advance in stocks. The yield on the benchmark 10-year Treasury note rose to 4.65 percent from 4.62 percent late Tuesday.

Gold prices rose.

Advancing issues outnumbered decliners by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.68 billion shares.

Overseas, Japan's Nikkei stock average fell 1.24 percent. Britain's FTSE 100 closed up 0.50 percent, Germany's DAX index gained 1.00 percent, and France's CAC-40 added 1.04 percent.