Lehman Preferred Series "J" Preferred (fka LEHJQ)

[DOLLARLAND]

I just about fell off my chair with this headline, but I didn't read it the way they meant it (little do they know about what's coming):

Dow Exceeds 10,000, Led by Financials, on Recovery From Lehman

By Jeff Kearns and Mary Childs

Oct. 14 (Bloomberg) -- The Dow Jones Industrial Average climbed above 10,000 for the first time in a year, led by lenders, as U.S. stocks approached their highest levels since Lehman Brothers Holdings Inc.’s bankruptcy sent the global economy into a tailspin.

Bank of America Corp., American Express Co. and JPMorgan Chase & Co. more than doubled since the 30-stock gauge slid to a 12-year low on March 9 as global financial firms began recovering from $1.6 trillion in writedowns and credit losses. International Business Machines Corp. and Hewlett-Packard Co. jumped at least 52 percent on signs the nation was recovering from the worst recession in seven decades.

The Dow fell as much as 43 percent after Lehman filed the largest bankruptcy in September 2008 and dragged the financial system to the brink of collapse. Investors have returned to the stock market after the U.S. government lent, spent or guaranteed $11.6 trillion to shore up banks and revive the economy.

“A lot of people make fun of these milestones, but I think that it has an effect on psychology,” said David Darst, the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.4 trillion in client assets. “That can have an effect on tipping people over to being more worried about being out of the market.”

The measure rose as much as 130.52 points, or 1.3 percent, to 10,001.58 today after Intel Corp.’s sales forecast and earnings at JPMorgan topped analysts’ estimates.

Recovering From Rout

The Dow’s rally since March 9 recaptured almost half of its 7,617-point tumble from its record of 14,164.53 two years ago. The Dow, which first reached the five-digit milestone more than a decade ago, remains 29 percent below its Oct. 7, 2007, all- time high even after the biggest two quarter gain since 1987.

All 30 Dow companies have risen since the March low, led by Bank of America’s almost fivefold surge after the biggest U.S. bank by assets reported a first-half profit of $7.47 billion. American Express more than tripled for the second-best performance, followed by a near-tripling for JPMorgan.

The 113-year old benchmark closed above 10,000 for the first time on March 29, 1999, and went on to advance 25 percent that year for a ninth-straight annual gain. The gauge peaked at 11,722.98 in January 2000 before plunging 38 percent through October 2002 as the technology-stock bubble burst.

The Dow exceeded 10,000 again in December 2003, fell below five months later and then remained above every day from October 2004 to October 2008. It set a record high of 14,164.53 in October 2007 after surging 94 percent in five years. Nine months later, the gauge entered a bear market, marked by a decline of at least 20 percent, for the first time since 2002.

‘Fashion Staple’

“Ten years ago, the first time I was handed a Dow 10,000 hat, I never suspected it would be a fashion staple,” said Diane Garnick, who helps manage $413.9 billion as an investment strategist at Invesco Ltd. in New York. “And I don’t think this will be the last time we hit 10,000, because of the volatility in the market.”

The Dow swung in an average intraday range of 172 points this year and 281 points last year, higher than the 112-point average gap between the intraday high and low during the 2002- to-2007 bull market. The gauge moved in a record 1,018-point range on Oct. 10, 2008, as investors assessed the potential fallout of Lehman’s bankruptcy.

“It’s still going to be a volatile market but we think it’s sustainable and that we’re on track to go up from here,” said Peter Sorrentino, who helps oversee $13.8 billion at Huntington Asset Management in Cincinnati. “It’s an important psychological level that’s more an indication of the mom and pop money coming back into the market.”

Assets in Cash

Americans holding $3.45 trillion in cash may fuel further stock gains. U.S. investors have cash equal to about three- quarters of Standard & Poor’s 500 Index companies’ net assets, according to data compiled by the Investment Company Institute and Bloomberg. The measure was 62 percent at the peak of the bull market in 2007.

Former Federal Reserve Chairman Alan Greenspan said Sept. 30 that the U.S. economy will probably slow next year as the surge in stocks comes to an end.

“The odds are we flatten out,” he said of stocks in a Bloomberg Television interview. “That flattening out will put some sort of dull face on 2010.”

The Dow fell as much as 25 percent this year before erasing its drop on June 12 as confidence grew that the worst recession since World War II is ending. Speculation that government efforts will revive growth reversed the slide after the bankruptcy of General Motors Corp. and more than $100 billion of subprime losses at Citigroup Inc. led the gauge lower.

Economic Proxy

The index is intended to “provide a clear, straightforward view of the stock market and, by extension, the U.S. economy,” according to the Web site for Dow Jones, a unit of Rupert Murdoch’s News Corp. that bought the New York-based publisher for $5.2 billion in December 2007. The Journal’s editors select the firms in the Dow.

Dow Jones removed Citigroup Inc. and GM in June and replaced them with Cisco Systems Inc. and Travelers Cos., a precursor to Citigroup that originally joined the index in 1997 before changing its name to Citigroup Inc. in 1999. Since the index first topped 10,000 a decade ago, there have been 12 changes to the average’s companies.

The gauge, created on May 26, 1896, by Wall Street Journal co-founder Charles Dow, was initially valued at 40.94 and included American Cotton Oil, Chicago Gas, Distilling & Cattle Feeding, National Lead and Tennessee Coal & Iron. General Electric Co. is the only remaining original member, though it wasn’t in the average for nine years starting in 1898.

Dow 100

The Dow surpassed 100 in 1906 and reached 1,000 in 1972. It topped 5,000 in 1995 after jumping 1,000 points in nine months. It was made up of 12 stocks initially, increased to 20 in 1916 and expanded to 30 in 1928. The average’s biggest single-day point loss was 777.68, or 7 percent, on Sept. 29, 2008.

In this year’s third quarter, the Dow rallied 15 percent for the biggest advance since the fourth quarter of 1998, led by a 55 percent surge by Caterpillar Inc., the world’s largest maker of construction equipment. American Express and GE both gained more than 40 percent in the period, while Bank of America jumped 28 percent.

“The market’s strength over the last three months has been pulling investors off the sidelines and into the market,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “I don’t think you’re going to see bulls completely walk away from the market.”

To contact the reporters on this story: Jeff Kearns in New York at [e-mail]; Mary Childs in New York at [e-mail].

Last Updated: October 14, 2009 13:24 EDT