Dow Industrial Average Erases 2009 Decline on Economic Recovery

The Dow Jones Industrial Average erased its 2009 loss, becoming the last major U.S. stock gauge to give investors a profit for the year, as confidence increased that the worst recession since World War II is ending.

The Dow, down 25 percent on March 9 after its worst start to a year, completed the recovery yesterday after rising four straight weeks. American Express Co., the biggest U.S. credit- card company by purchases, and International Business Machines Corp., the largest computer-services provider, are up the most in 2009 among the average’s 30 companies.

Speculation that $12.8 trillion in government spending will revive growth helped push the Dow above breakeven after the bankruptcy of General Motors Corp. and more than $100 billion of losses at Citigroup Inc. led the gauge lower. The 113-year-old average wiped out its 2009 loss two weeks after the S&P 500 and nine weeks after the Nasdaq Composite Index.

“We’re reaching a bottom in the economy and looking forward to the climb out,” said Hans Olsen, who helps oversee $120 billion as chief investment officer of JPMorgan Private Wealth Management in New York. “The Dow erasing its losses is clearly good news. The Dow holds a special place in investor psyche.”

U.S. stocks rose this week, pushing the S&P 500 to the highest level since November, after oil’s climb above $72 a barrel drove energy stocks to a seven-month high.

Schlumberger Ltd. and Halliburton Co. gained more than 5 percent since June 5 as oil rallied. Bank of America Corp. soared 16 percent after analysts at Morgan Stanley and Stifel Financial Corp. raised their profit estimates for the lender.

Higher Yields

A measure of utilities jumped 3.8 percent, the most among the S&P 500’s 10 industries this week. Goldman Sachs Group Inc. said in a June 11 report that it’s becoming bullish on the group because of its higher dividend yield compared with the payout on 10-year Treasuries. The S&P 500 Utilities Index has a yield of 4.66 percent, compared with 3.79 percent on the 10-year note.

The Dow climbed for a fourth week, increasing 36.13 points, or 0.4 percent, to 8,799.26. It ended 2008 at 8,776.39. The S&P 500 added 0.7 percent to 946.21.

“We’re still relatively optimistic toward the equity market,” said Marc Harris, co-head of global research at RBC Capital Markets in New York. “In the short term, we may be stalled out, but we’re starting to see the right kind of recovery.”

266% Surge

The Dow, now up 0.3 percent in 2009, has risen 34 percent from a 12-year low on March 9 in the steepest 68-day rally since November 1982, the start of a bull market that lasted five years. Bank of America, based in Charlotte, North Carolina, and American Express of New York increased the most during the surge, jumping 266 percent and 136 percent, respectively.

American Express is up 36 percent in 2009. It reported more first-quarter profit than analysts estimated and won approval to repay the government’s Troubled Asset Relief Program.

IBM has gained 29 percent this year as the world’s biggest computer-services provider increased its dividend by 10 percent to expand shareholder returns after scrapping a bid to buy Sun Microsystems Inc.

Sixteen of the 30 companies that began the year in the Dow remain lower for 2009. Last week, Wall Street Journal editors who oversee the gauge kicked out the two worst-performing companies, Citigroup and GM, and replaced them with New York- based insurer Travelers Cos. and San Jose, California-based Cisco Systems Inc., the biggest maker of network equipment.

Pfizer, GE Drop

Pfizer Inc., the New York-based drugmaker, and General Electric Co., the Fairfield, Connecticut, maker of power-plant turbines that got 33 percent of its operating profit last year from lending, have both slumped 17 percent since Dec. 31.

New York-based Citigroup, once the world’s biggest financial company by assets, and Detroit-based GM, formerly the largest automaker, have plunged 48 percent and 63 percent this year, respectively. The first global recession in seven decades crippled their earnings.

The Dow turned positive in 2009 for the first time since Jan. 6 as better-than-estimated data on jobless claims and retail sales bolstered confidence the economy is recovering. The Conference Board’s measure of leading economic indicators, including stock prices and manufacturing, increased in April for the first time since June 2008.

“If you’re a long-term investor, this is a great time to buy,” said Frank Ingarra, the Stamford, Connecticut-based manager of the $167 million Hennessy Focus 30 Fund that beat 98 percent of its peers in the past five years. “People are starting to get the feeling that they’re missing out on something big.”