Investor: Dow Topping 12,000 ‘a Significant Psychological Number’
by February 12, 2011 7:00 pm 80 views
Talk Business contributor Bob Williams, SVP with Delta Trust Investments, joined us last night to discuss the financial markets’ strong February and what may happen as we exit the current earnings season.
The blue-chip Dow Jones Industrial Average closed above the magical barrier of 12,000 on February 2 and has stayed there ever since. It is the highest level the Dow has reached since June 2008 before the crushing recession of the last two years. But are we reading too much into this benchmark number?
"It’s a significant psychological number. From a technical perspective it’s not as important, but certainly from a consumer confidence perspective and just a general overall market confidence predictor, it’s shown that it’s holding up quite strongly and it’s encouraging," Williams said.
The current earnings season has produced a mixed bag of profits and losses, but by and large, public companies are beating street estimates which boosts stock prices. And, a lot of profitable companies have been taking their money and reinvesting it in stock buybacks, cash reserves, and some reinvestment in their companies.
Jobs, however, are still struggling. Might we see more mergers and acquisitions versus new job investment from some of these firms?
"There are a lot of companies sitting with a lot of cash," Williams explained. "The synergies from them may well come from that type of buyout versus the traditional investing in their own companies. So I think it’s very possible that we’ll see mergers and acquisitions and a tightening of the number of businesses in the United States."
Williams said that going forward he’ll be keeping his eye on two major economic indicators.
"The two key numbers I’m watching right now are inflation and interest rates, both of which seem to be very well managed under the current economic scenario," he said. "All in all, when you look at things, really we’re in pretty good shape in that regard."
You can watch Williams’ full comments in this interview below.