Dow Finishes Above 12,000 for First Time

The Dow Jones industrial average passed another milestone Thursday, closing above 12,000 for the first time as investors showed their confidence in America’s old-line companies.

The 30-stock Dow index includes such stalwarts as Caterpillar, McDonalds and Coca Cola. Bullish observers said that the robust profits being reported or predicted for many of the Dow companies suggest that the index’s recent run-up is far from finished.

“Hold the champagne,” advised Robert R. Bissell, president of Wells Capital Management in Los Angeles. “Save the celebration for when we hit 13,000.”

Bissell said investors who wrongly shunned blue-chip U.S. companies for years are realizing that big firms have learned to control costs and position themselves as multinationals to benefit from strong economies around the world.

But Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., was skeptical, saying the hoopla surrounding the Dow’s surge “may be a big deal in a way that’s not comforting.”

Sonders said she worried that the public had lost its healthy mistrust of the market. With memories of the dot-com bust fading and the housing boom at an end, she said, individual investors have been pouring money into stocks -- with each newspaper headline and TV segment about the Dow’s new highs acting like magnets.

“I find all the positive sentiment a little troubling,” Sonders said. “Massive fear and despair and blood in the streets is when you want to be buying -- not when every media outlet is popping the champagne and talking about how it’s great that the individual investor is getting back into the market.”

As if to serve as a reminder that markets can also go down, the 12,000-point milestone was breached 19 years to the day after Black Monday in 1987, when the Dow sank 508 points for its second-biggest percentage drop ever.

On Thursday, the Dow edged up 19.05 points, or 0.2%, to 12,011.73, continuing its long ascent back from the 2000-02 bear market. It has set new records on nine of its last 13 trading days, starting with Oct. 3, when it finally rose above its Jan. 14, 2000, peak of 11,722.98.

Broader stock indicators, still far off their highs set during the dot-com bubble in 1999 and 2000, also edged up. The Standard & Poor’s 500 index rose 0.07 of a point to 1,366.96, and the Nasdaq composite index rose 3.79 points to 2,340.94.

Bond yields moved higher, with the yield on the 10-year Treasury note rising to 4.79% from 4.76%.

Much of Thursday’s Dow advance could be traced to strong earnings at Coca-Cola, predictions of higher profits at AT&T; and Verizon Communications, and speculation that tobacco and food giant Altria Group would spin off its 88% stake in Kraft Foods. Those companies are all components of the Dow, and their shares rose sharply.

Coca-Cola rose 95 cents, or 2.2% to $44.91 after beating earnings expectations. AT&T; and Verizon gained after Lehman Bros. predicted faster growth for phone companies. AT&T; rang up 81 cents, or 2.5%, to $33.75 and Verizon rose 62 cents, or 1.7%, to $37.21.

Altria jumped $1.85, or 2.4%, to $80.19 on the possibility of the Kraft spin-off.

Nonetheless, pessimists found plenty to worry over.

The Conference Board’s index of leading economic indicators rose less than forecast in September, and a regional economic index published by the Philadelphia Federal Reserve Bank contracted.

A barrel of light sweet crude oil rose 85 cents to $58.50 in New York as traders mulled over an OPEC proposal to prop up prices by cutting production by 1 million barrels a day.

And stocks themselves, particularly in the broader markets, were mixed, including earnings from some technology sector companies that disappointed investors. Chip maker Advanced Micro Devices, for example, tumbled 13.3% to $21.01, a day after reporting earnings.

Calling the 12,000 Dow “a complete nonevent,” bearish money manager Bill Fleckenstein of Seattle said enthusiasm over the milestone “is a signal that it’s the end of the party.”

Hugh Johnson, chairman and chief investment officer at Johnson Illington Advisors in Albany, was far less gloomy.

The upturn in stocks, he said, “has been long and strong enough that there’s a pretty valid argument that you should look for signs of the end of the bull market and the beginning of a bear market. But I don’t see those signs yet.”

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Times staff writer Walter Hamilton contributed to this report and Times wire services were used in compiling it.