Here's why the Dow closed above 13,000 for the first time since 2008 Tuesday, indicating that the stock market has finally returned to its pre-recession level.
The Dow Jones Industrial Average has not closed above 13,000 since May 19, 2008, nearly four months before the financial crisis went into free fall following the collapse of Lehman Brothers.
Preliminary calculations cited by Yahoo! Finance indicated that the Dow finished up 23.61 points on the day at 13,005.12. The Dow passed 13,000 for the first time since 2008 last Tuesday, then did so again on Friday and Monday, but never closed at such a high number, Yahoo! Finance reported.
I don't have rose-colored glasses on, but I think the path of least resistance is up, Richard Weeks, managing director and partner at HighTower's VWG Wealth Management, said. The news is generally good. Short-term, all signs say that risks have been reduced.
The rally to the 13,000 close came about in part as a result of a better-than-expected consumer confidence report that came out at 10 a.m. Tuesday and boosted optimism in America's economy and its jobs market, according to Bloomberg News.
But getting within shooting distance of the mark was only possible because the Dow rode the economy to a rebound. As the unemployment rate has fallen for the past five months and the economy has added hundreds of thousands of jobs (including 243,000 in January, the best month since 2006), the Dow has steadily risen, according to Yahoo! Finance.
Two months ago, we were talking about a double-dip recession. Now consumer confidence is growing, Ryan Detrick, senior technical strategist for Schaffer's Investment Research, told Yahoo! Finance. A major milestone like 13,000 wakes up a lot of investors who have missed a lot of this rally.
The Dow had its best January since 1997, and has continued its rise, which is up 6.5 percent on the year. The DJIA first passed the 13,000 mark on April 25, 2007, when the unemployment rate was 4.5 percent, according to Yahoo! Finance. The average peaked at 14,164.53 on Oct. 9, 2007.
Analysts say the stock market has gotten used to ongoing threats over the past year, including the stalled American economy, rising oil prices and the European debt crisis.
The U.S. economy is in decent shape, Malcolm Polley, chief investment officer at Stewart Capital in Indiana, Pa., told Bloomberg News. Technicals aside, we're really not that concerned. Stocks are relatively cheap.