A new set of leaders takes Dow to 14,000

Analysis |

It's been just over three months — 59 trading days — since the Dow Jones industrial average broke through 13,000. Now that it's at a record 14,000, some Dow leaders have changed, reflecting a mood shift on Wall Street.

Heavy industrials and materials did well during the Dow's journey from 12,000 to 13,000, from Oct. 19, 2006, through April 25, 2007. They remain strong now. But consumer, health-care and financial stocks have fallen out of favor, while technology, which had lagged previously, has surged.

"I think you're seeing some optimism on the economy, especially the global economy," says Stuart Schweitzer, global markets strategist at J.P. Morgan Asset and Wealth Management. "The large-cap industrials benefit most from that, given the cheap dollar. And technology is the enabler of cost-cutting."

Worries about the economy at home hurt financials. "Large-cap finance has been hit hard by the subprime mortgage debacle," says Jack Ablin, chief investment officer at Harris Private Bank, referring to loans to weak borrowers. "There's a sense of growing credit deterioration among consumers that has investors in finance nervous." Lower credit quality also could affect consumer spending, weighing on stocks in consumer sectors.

These sector trends will likely continue through year-end, Schweitzer says. Then, he thinks the economy will improve, helping today's laggards. "The movie will end well, but there may be some scenes where you'll want to take your eyes off the screen here and there."