msnbc.com news services
updated 4/19/2007 8:24:52 AM ET 2007-04-19T12:24:52

Investors pushed the Dow Jones industrial average to new record high close Wednesday, signaling the stock market’s recovery from the sharp slump it saw in late February and early March.

Major Market Indices

The Dow broke through its previous closing record of 12,786.64, which was set on Feb. 20 this year, a week before a global sell-off hit equities markets and the Dow tumbled 416 points. A subsequent pull-back shaved more than 3 percent from the major U.S. indexes before they began a recovery in mid-March.

The Dow’s new record comes one day after report on consumer inflation, released by the government, showed underlying inflation is displaying signs of easing and economic growth is not slipping, as some had feared. Another report released Tuesday showed new home construction rose for a second straight month in March, providing a glimmer of hope that the worst of the housing downturn may be over.

“The core CPI number was a big sigh of relief,” said Mark Bronzo, managing director at Nationwide Separate Accounts LLC in Irvington, New York. “For people arguing we’re in a stagflation environment of slower growth and higher inflation, that number sort of eases those concerns.”

Despite the Dow’s new record high, which was driven by strength in stocks in the blue-chip index like JP Morgan Chase, Boeing and Caterpillar, Wednesday’s trading session was lackluster, overshadowed by disappointing results from tech bellwethers such as Yahoo and IBM according to Mike Malone, a trading analyst at Cowen & Co.

The earnings results stunted some of the market’s appetite for technology issues, Malone said, although he dismissed the idea that Yahoo’s earnings is the start of any downward trend for first-quarter reports.

“There have been some company-specific issues out there, but they really aren’t indicative of the underlying earnings environment,” Malone said.

Wall Street was uneasy about a sharp drop in the U.S. dollar, which is now at 26-year lows against the British pound. The U.S. currency has weakened because interest rates have remained steady since the summer and amid signs of a slowing U.S. economy.

Investment bank JPMorgan Chase lifted the Dow after the bank reported a 55 percent jump in profits that far surpassed Wall Street’s expectations. The 30 companies that make up the index — nearly half of which report earnings this week — have been mostly beating the Street’s predictions.

But investors pulled back from tech stocks after Yahoo posted a surprising 11 percent drop in its first-quarter profit. Disappointing results from International Business Machines and Motorola added to the selling.

Charlie White, chief investment officer of the ThomasLloyd Funds, said that while overall earnings have been good, investors appear to still be waiting further signs about where the economy is headed.

“It’s one of these periods of time that you don’t have any compelling evidence either way and what you need to do is stay focused and be patient,” he said. “I ask myself the question: ‘Is this the beginning of a leg up in a bull market, or is this a last gasp?’”

Investors are focused on earnings reports to discern a direction for stocks. Standard & Poor’s has predicted earnings for companies in the S&P’s 500-stock index grew less than 4 percent in the first quarter, much less than in previous quarters.

The Dow moved as high as 12,838.46 before pulling back and closing with a gain of 30.80 points, or 0.2 percent, and above 12,800 for the first time, while the broader S&P’s 500-stock index added 1.02 point, or 0.1 percent. But the technology-rich Nasdaq composite index slipped 6.45 points, or 0.3 percent.

Light, sweet crude rose 3 cents to $63.13 per barrel on the New York Mercantile Exchange although a government report showed a bigger-than-expected decline in gasoline inventories. The U.S. Energy Information Administration said stockpiles dropped 2.7 million barrels to 197 million barrels.

Yahoo’s shares plunged $3.78, or 12 percent, to $28.31 after the Internet portal reported disappointing results late Tuesday. The results left Wall Street wondering how much longer it will take the company to regain its financial footing after it stumbled through most of 2006.

Pressure was felt elsewhere in the tech sector. IBM posted disappointing results late Tuesday, and its shares dropped $2.32, or 2 percent, to $94.80. Hard driver maker Seagate Technology fell 85 cents, or 4 percent, to $20.30 after it reported profit fell 22 percent in the first quarter, and lowered its forecast.

Cell phone maker Motorola reported a first-quarter loss due to sluggish sales, and charges to cover a legal settlement and restructuring efforts. However, sales surpassed expectations and its stock price rose 27 cents to $18.22.

Medical device maker Abbott Laboratories fell 97 cents to $58.03 after it said Wednesday its first-quarter profit fell 19 percent. The results excluding certain items, however, beat analyst estimates.

JPMorgan Chase’s stock price rose $1.89, or 4 percent, to $52.07 after the nation’s third-largest bank reported a 55 percent increase in profit. The New York-based bank said first-quarter results were boosted by strength across its primary business lines, though it did increase reserves to offset subprime mortgage losses.

Overseas, Japan’s Nikkei stock average closed up 0.8 percent. in Europe, Britain’s FTSE 100 closed down 0.7 percent, Germany’s DAX index fell 0.9 percent and France’s CAC-40 dropped 0.4 percent.

South Korean and Australian stocks hit new records Wednesday, while the sometimes-volatile Shanghai Composite index edged up 0.01 percent. It was a nearly 9 percent drop in the Shanghai Composite index that helped trigger the Feb. 27 sell-off on global stock markets. Indexes like the Shanghai Composite, however, took less time to resume hitting highs than did most U.S. indexes.

The Associated Press and Reuters contributed to this report.

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