Dow hits new high for 2009

NEW YORK (AP) — Investors popped the stock market’s rally back in gear Friday after analyst upgrades boosted optimism about the economy.

A 36-point advance in the Dow Jones industrial average left the index at a new high for the year and with a gain of 215 points for the week. Stock indexes have risen in nine of the past 11 days.

The market got a boost from a new economic forecast by Barclay’s Capital, which raised its projection for growth in the nation’s gross domestic product for first three months of next year to 5 percent from 3 percent. GDP has been shrinking, although many economists think it will return to growth for the July-September quarter.

Meanwhile, Procter & Gamble Co. pulled the Dow higher after an analyst raised her rating on the giant consumer products company, citing the company’s price-cutting strategy. P&G’s huge stable of brands includes Tide detergent and Gillette razors.

The market’s climb came a day after a pullback that did little to quiet analysts’ calls for a break in the rally.

Marc Harris, co-head of global research for RBC Capital Markets in New York, said the strength of the rally has surprised many investors because some of the stocks posting the biggest advances are of lower-quality companies with weak balance sheets that investors only months ago feared might go out of business.

“Even turkeys are going to fly in a hurricane,” Harris said. “Those lower-quality companies are leading the charge here.”

Financial companies and home builders have been among the biggest gainers in the recent run. Many of these companies still face major hurdles with bad debt and the weak housing market.

Many analysts expect the market’s run will slow — but perhaps not stop — as investors shift their holdings from industries where the gains have been strong, like technology, to other areas which have lagged.

According to preliminary calculations, the Dow rose 36.28, or 0.4 percent, to 9,820.20. The broader Standard & Poor’s 500 index rose 2.81, or 0.3 percent, to 1,068.30, while the Nasdaq composite index advanced 6.11, or 0.3 percent, to 2,132.86.

For the week, the Dow rose 2.2 percent, while the S&P 500 index and the Nasdaq advanced 2.5 percent.

Stocks rallied during the week in part because of improvements in economic reports on retail sales and manufacturing. Federal Reserve Chairman Ben Bernanke’s comment that the recession has “very likely” ended also cheered investors even though he warned that problems like high unemployment will linger.

Next week, figures on home sales and consumer sentiment could shape trading, as could a report due Monday on leading indicators. The economic snapshots is designed to predict economic activity three to six months in advance. Fed policymakers are almost sure to leave a key banking lending rate at a record low near zero at the conclusion of a two-day meeting Wednesday. President Barack Obama will host the Group of 20 economic summit in Pittsburgh starting Thursday.

Phil Guarco, global investment strategist for J.P. Morgan’s Private Bank in New York, said a broad rally has made it easy for investors.

“It’s been kind of an investors’ nirvana because all asset classes have been going up essentially,” he said, noting exceptions like the dollar and the value of cash holdings. “It can’t go on forever like that.”

Many analysts still say the rally is due for a break. Linda Duessel, equity market strategist at Federated Investors in Pittsburgh, said a retreat of 10 percent or more in major stock indexes wouldn’t be surprising. The S&P 500 index has rocketed 57.9 percent from a 12-year low in early March. An advance that size might often take five or six years to occur.

She said that even if there are slides, stocks are likely to resume their climb because so many investors missed the rally.

“The most common question I get when I travel is ‘Do you think I’ll get a pullback so I can get in?’ That’s so bullish,” she said.