Stocks ends 2013 with bang; Dow up most since ‘95

marketwatch.com ^ | December 31, 2013 | William L. Watts

[John W]

NEW YORK (MarketWatch) —The Dow Jones Industrial Average and the S&P 500 rang out 2013 with record closes Tuesday, ensuring blue chips posted the biggest annual gain in 18 years.

In the end, the Federal Reserve’s decision earlier this month to begin scaling back the size of its monthly bond purchases was the “gift that kept giving” as Wall Street capped a historically strong rally with big gains in December, said J.J. Kinahan, chief derivatives strategist at TD Ameritrade in Chicago.

The S&P 500 index ended the year with a 29.6% annual gain, its biggest yearly jump since 1997. The Dow industrials ended 2013 with an annual rise of 26.5%, the largest since 1995. The Nasdaq Composite rose more than 38% over the course of 2013, marking its biggest gain since 2009.

[henkster]

Bubble, bubble; toil and trouble.....

[castlegreyskull]

I agree.

[Alberta's Child]

Free money from the Fed underpins this performance. Gone are the days when the broad indices truly reflect the performance of businesses.

I'm not so sure that this is true. Let's look at a broad index like the S%P 500. Do you really believe that the aggregate market value of these publicly traded companies does not accurately reflect their performance?

One of the mistakes that is commonly made when people look at these indices is that they look at profitability as the only measure of "performance" in determining the value of a broad range of companies. Profitability is one key measure, but growth prospects are also important in determining value. And yet neither of these account for what has probably been the single biggest driver of growth in the S&P 500 index: consolidation in industry.

Here's a perfect case in point ...

In 1999, two of the largest companies in the energy sector -- Exxon and Mobil -- merged into a single company. Before the merger, they were two separate companies that were included in the S&P 500 index. When they merged, the S&P 500 didn't suddenly become the S&P 499 ... The index was changed to reflect the addition of another company at #500.

In other words, there has been a lot of growth in the S&P 500 from one year to the next simply because the companies in the index aren't always the same companies from one year to the next.

Nowhere is this more evident than in a much smaller index like the Dow Jones Industrial Index. The Dow Jones Industrial Average (DJIA) tracks the value of 30 large companies that reflect industrial activity related to the U.S. economy. By my count, 14 of these 30 companies have changed just since 2000. And one of them -- AT&T -- had the unusual distinction of being dropped from the index in 2004 and then added back in 2005 after it was acquired by SBC Communications, which then changed its formal name to AT&T.

[demshateGod]

You’re paying for people who are always going to the doctor and taking 30 pills a day.

[RckyRaCoCo]

It's a faux recovery built on monopoly money and manipulated figures...greatest Ponzi scheme of all times created by global elites and others that simply tapped that "shining city on a hill" for all it's REAL value.

Oh, they'll throw a few crumbs out there to others, just to keep the fraud going...but if you're not among the elites(like a 5 figure middle-class earner or below)you're about to get swallowed up like a Florida sinkhole.

If you're poor, plan on staying that way.

(of course poor in America isn't the same as poor elsewhere...especially if you know how to work(cheat)the system...that pacifier will get pulled eventually...all part of the plan).

If it all does collapse it will be because no one was minding the store, someone inside deliberately left the backdoor open, and thieves did what thieves do.

“A republic, if you can keep it.”

[MATSEVAH]

The market is on life support , everything from fake numbers to the Feds pumping more money into the economy , most people are giving up on looking for jobs , and the jobs that are being created on part-time , we need about 300,000 jobs a mouth and we are getting little over half of that.A paper tiger economy is all it is if that.Anyone can screw with numbers but go outside and look around you will see the real economy.

[JoeFromCA]

From Oct. 2007 to spring 2009 the equity market dropped by 57%. But for those of us who have stayed the course, the financial awards have been tremendous. In the past 5 years I have made 3 times as much as I “lost” (on paper only) during that period.
Such corrections are not unheard of, and 10% to 20% corrections are very common. One has to stay the course.
There are two economies: the employment economy ( which is bad) and the financial economy (which is very good).

[cherokee1]

You’re exactly correct about the indexes but I’d change your line by saying the “companies in the indexes are NEVER the same from year to year since the mid 70’s.” The DOW would be under 1000 but for the manipulation of the listings to always rotate in companies with good growth prospects. From the time they dumped Johns Manville about 1975 the index has been somewhat phony and in terms of measuring the economy is useless. It only measures itself and this past year is up mostly because of growth by about 1/3 of its components. Across the board there is a lot of flat or down-sloping performance and I expect that to continue.

[GraceG]

Stocks are completely a FIAT instrument of the unholy alliance between Big Government and Big Business.

[Lurkina.n.Learnin]

Bump for later

[pieceofthepuzzle]

“It’s a great recovery from 2008, but you have to believe that it’s gone way beyond the accepted levels, and a major correction has to occur somewhere in 2014. A dramatic five to eight percent drop?”

If the stock market were strongly linked to hard economic facts and economic reality, you'd probably be right, but it's not - so anything can happen.

It seems to me that in recent years, going back to the Clinton years, it takes a significant event that cannot be ignored to trigger a large drop. That may happen, but may not. These kinds of events can also be manipulated by the media - and given that there is an important mid-term election coming up in 2014 they may be very motivated to suppress news items that can negatively effect the market. On the other hand, the effects of Obamacare will be difficult to ignore.

[Cringing Negativism Network]

The thing is, once Ted Cruz wins, how does he turn our economy around?

I say bring back American jobs.

Now.

[Taxman]

It is a house of cards.

Standby, and stand back!

[CodeToad]

“businesses were making tons and tons of money.”

Businesses usually had $12 trillion cash. Today they have over $21 trillion. Yes, they are making money, but they are scared to death to spend it.

[Ophiucus]

That 21 trillion has been devalued to, say, six trillion, halving the spendable reserves in an out of control government incursion on the economy. Yeah, businesses are right to be scared.