NEW YORK — The Dow Jones industrial average closed at an all-time high Tuesday, erasing losses from the financial crisis and recession, and beating the former record set in October 2007.
The index jumped from the opening bell, climbed as much as 158 points early and peaked at 14,286.37 before closing at 14,253.77.
Twenty-seven stocks in the 30-member Dow advanced, with industrial companies leading the gains.
The Dow has more than doubled since falling to a low of 6,547 in March 2009 after the financial crisis and the onset of the recession. Tuesday’s close surpassed the previous record close of14,164.53 set on Oct. 9, 2007.
“Five years ago the Dow was at its previous high, and then we had a nightmare called the ‘Great Recession,’ and now we are waking up from it,” said James Angel, an associate professor of finance at Georgetown University’s McDonough School of Business.
The stock market’s rebound has outpaced an economic recovery that has been slow and steady.
“Whether they want to admit it or not, everyone is very impressed with the resilience of the market,” said Alec Young, a global equity strategist at S&P Capital IQ.
The last time the Dow was this high, Apple had just sold its first iPhone and George W. Bush had another year as president. The U.S. housing market had yet to bottom, and the financial crisis that took down Lehman Brothers was still a year away.
The recovery in stocks may even have been quicker had memories of the financial system’s near-collapse not been on investors’ minds, said Robert Pavlik, chief market strategist at Banyan Partners.
“It’s still pretty close to the front of people’s brains,” he said. “That’s one of the reasons that people are hesitant to invest in the stock market.”
That could be changing. More money has been flowing into stock mutual funds since the beginning of the year.
Now, investors who have missed out on the run-up maybe deciding to get off the sidelines, Pavlik said.
“People are now starting to realize that it is a bull market,” said Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Conn. “It’s not going to come back, you’ve missed the train, and the train still has a long way to go. But you better get on it.”
The Dow opened higher Tuesday after a surge in markets across the globe.
China’s markets rose after the government said it would support ambitious growth targets. The nation will keep its growth target at 7.5 percent for this year and plans a 10 percent jump in fiscal spending, the government said during the start of the National People’s Congress in Beijing.
European markets jumped after a surprisingly strong rise in retail sales across the 17-country group that uses the euro. In the U.S., more hopeful news about housing kept the momentum going.
Even with stocks trading at, or close to, record levels, they are still a good investment because earnings have risen so much, said Darell Krasnoff, managing director at Bel Air Investment Advisors.
“People get overly focused on benchmarks,” he said. “The fact that it’s reached that level is an interesting landmark, but it doesn’t say anything about whether the market is over-, or undervalued.”
Stocks are also attractive compared with bonds after a five-year rally in the debt market that pushed yields to record lows.
The yield on the 10-year Treasury note, currently at 1.90 percent, is still lower than the yield of about 2.1 percent on the S&P 500, which measure the ratio of dividend payments to stock prices.
Despite the rise in the Dow, the U.S. economy has not fared as well. Unemployment was just 4.7 percent when the Dow last reached a record 5 1/2 years ago, versus 7.9 percent today.
But the economy is strengthening in many areas. Housing is recovering,companies are hiring more and corporate earnings are growing. That helped drive a 9 percent rise in the Dow this year, impressing even ardent skeptics. For all of last year, the index rose 7 percent.
“The market is basically saying there is not a lot of bad news out there. The sequester came, and the world did not end on March 1; the war in Afghanistan is winding down; the energy situation seems to be improving; and the housing market is on the mend. The world is not ending, and I think that is being reflected in stock prices,” Georgetown’s James Angel said.
Stocks are also benefiting from the economic stimulus from the Federal Reserve and other global central banks.
Under a program called “quantitative easing,” the Fed has bought trillions of dollars of bonds, pushing up their prices and sending their yields lower. That makes stocks more attractive to investors than bonds and keeps interest rates low throughout the economy, encouraging investment and spending.
The U.S. central bank began buying bonds in January 2009 and is still purchasing $85 billion each month in Treasury bonds and mortgage-backed securities.
The Dow has even managed to climb to a record despite the backdrop of political wrangling in Washington, with automatic government budget cuts taking effect Friday after President Barack Obama and Congress failed to reach a budget deal. Economists expect the cuts to hurt U.S. economic growth, and though both Republicans and Democrats have pledged to retroactively undo the cuts,they have given no indication yet of how that would take shape.
The Dow’s gains Tuesday were led by industrial and technology stocks. Cisco System rose 48 cents, or 2.3 percent, to $21.22 and United Technologies climbed $1.89, or 2.2 percent, to $91.02.
IBM rose $1.34, or 0.65 percent, to $206.50, and 3M rose $1.17, or 1.1 percent, to $104.40, pushing the Dow higher.
That’s a signal that investors are optimistic since those companies stand to gain the most when the economy recovers. More stable, conservative stocks like utilities and consumer staples logged smaller gains.
From its March 2009 low to today, gains for the 30-member Dow have been led by American Express, up almost 500 percent from $10.64 to $64.12. Home Depot has jumped almost 300 percent from $18.23 to $70.47, according to data from S&P Dow Jones Indices. Hewlett-Packard is the only stock in the index that is lower than it wasfour years ago, falling 22 percent from $25.53 to $20.37.
The Standard & Poor’s 500 index rose 15 points, or 1 percent, to 1,539.79, within striking distance of its own record close of 1,565. The Nasdaq composite gained 42 points, or 1.3 percent, to 3,224.13.
Three stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume was light, 3.3 billion shares.
The yield on the 10-year Treasury note rose 2 basis points to 1.90 percent. Gold rose 0.2 percent to $1,574, and oil advanced 59 cents, to $90.71.
Information for this article was contributed by Steve Rothwell of The Associated Press; by Inyoung Hwang and Sarah Pringle of Bloomberg News; and Kate Gibson; and Barbara Kollmeyer of MarketWatch.
Front Section, Pages 1 on 03/06/2013