Dow hits 11,000 in overdue catch-up

NEW YORK — What took it so long?

The Dow Jones industrial average closed above 11,000 Monday for the first time in more than four years, one indicator of Wall Street's slow recovery from 9/11, recession and corporate scandals.

The Dow, comprising 30 big-name large-cap stocks from Alcoa to Wal-Mart, had a sleepy 2005, losing 65.51 points for the year. It closed Monday at 11,011.90

Hitting 11,000 merely means the Dow is "catching up with the other averages," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research.

"It's just a matter of the market evening itself out," he said. "The Dow was the only average in 2005 that didn't go up. The Dow has been below not only small-caps, but other large-caps."

In the first five trading days of the year, the Dow rose 2.75 percent, trailing the Standard & Poor's 500 index, up 3.35 percent; and the Nasdaq composite index, up 5.14 percent.

When the Dow last closed above 11,000 in June 2001, the Internet and telecom bubbles were in midburst. Business reporters wrote about "the New Economy" and "the Old Economy" without irony. Google was privately held, and gold was trading at $280 an ounce, near 20-year lows.

Now the Internet and telecom bubbles are dim memories and no distinction is made between New and Old economies. Publicly traded Google closed Monday up $1.24 to $466.90 and gold is setting 25-year highs, hitting $549.10 Monday.

The Dow is still 711.08 points, or 6.07 percent off its bull market peak of 11,722.98, reached Jan. 14, 2000.

The other thing that's changed: Large-cap stocks as a group — and many of the specific names in the Dow 30 — have fallen out of favor.

"The big blue-chip stocks have been the laggards for about five years," said Edward Yardeni, market analyst at money manager Oak Associates.

"Many blue chips are viewed as mature companies that aren't likely to show growth much exceeding GDP [gross domestic product]. Lots of names have managed to do that over the last five years, yet they haven't been accorded much respect."

That said, none of the indexes has regained its height.

The S&P 500 is off 237.31, 15.5 percent below its peak of 1,527.46 in March 2000. The Nasdaq is 2,729.93, or 54 percent, below its peak of 5,048.62, also of March 2000.

But the Dow, with only 30 stocks, only needs a couple losers to keep it down. And it has had more than a couple:

• Dow component General Motors has swooned over the past two years due to shrinking market share and growing concerns over its high salary, pension and health-care costs. The stock was trading above $50 in January 2004. Monday, it rose $1.61 to $22.41.

• Big pharma Dow components Merck and Pfizer have likewise seen their stocks sink.

Merck fell $12.07, or 27 percent, to $33 a share Sept. 30, 2004, when it said it was withdrawing its painkiller Vioxx. Lawsuits, declining sales and the resignation of its CEO followed. The stock closed Monday up 54 cents to $33.66.

Pfizer investors have had less drama but a fair share of worrying about expiring patents, a lack of new drugs, falling Viagra sales and safety concerns about painkiller Celebrex. The stock was unchanged Monday at $24.85, down from its adjusted five-year high of $46.75.

• Citigroup, the world's largest financial-services company, has seen its reputation stained by regulatory problems; its private banking unit was kicked out of Japan in 2004. Citigroup's price-to-earnings ratio is an anemic 11.04, compared with 13.91 for smaller competitor Merrill Lynch. The higher the ratio, the more returns investors expect in the near future.

Citigroup fell 23 cents to $48.39 Monday, down from its adjusted five-year high of $53.53.

• Retailer Wal-Mart has a price-to-earnings ratio of 17.82, which pales next to the 22.89 price-to-earnings ratio for smaller competitor Costco Wholesale. Wal-Mart shares fell 17 cents to $45.71 Monday, down from an adjusted five-year high of $63.94.

If you need further proof that the Dow's big guns aren't what they used to be, consider Internet-era darling Microsoft, which closed at a split-adjusted $46.19 on Nov. 1, 1999, the day it was added to the Dow. Monday, it fell 5 cents to $26.86.

These days, said Barrington's Paris, "some investors are talking about it being a value stock."