Stock market experts watched in awe yesterday as the Dow Jones industrial average roared to its sixth record in as many days and closed at 5,600.15, up 58.53 points.
At one point during the afternoon, it had climbed 74 points before it began to retreat.
"I'm speechless and awed," said Richard E. Cripps, a market analyst with Legg Mason Wood Walker Inc.
"I thought '82, when the market lifted off, was incredible. This thing is just so much more awesome."
"I'm sitting here looking at this thing and just shaking my head," said Rob Brown, a market strategist with Ferris, Baker Watts Inc.
"What we've got here is a runaway rally. At this pace we are going, we would go to 10,000 by year's end. It is just a question of when this pace poops out."
It doesn't look like the Dow's about to wilt anytime soon.
It has jumped 3.6 percent -- 192.56 points -- since Feb. 5 and has surged by more than 10 percent -- 556.37 points -- since mid-January.
The Dow has skyrocketed nearly 1,800 points -- a 46 percent increase -- since the end of 1994.
The market is being fueled by low inflation, a belief that interest rates will continue falling, and the baby boomer generation's sudden desire to save for their retirement years.
"I don't expect it [the Dow] to continue to go at this kind of clip, but it looks like it still has some room to go," said Don Hays, director of investment strategy with Wheat First Butcher Singer Inc., a Richmond, Va.-based brokerage.
In August 1991, Mr. Hays predicted that the Dow would reach 5,600 by 1996, and he thinks it will continue moving skyward because of expectations that the Federal Reserve Board will again cut short-term interest rates in March.
"You are not going to see a major correction until the market gets euphoric," Mr. Hays said. "It is not even close to euphoric.
Lower rates expected
"We probably have a year or 15 months to this bull market until we see the end of it, just because of the certainty of the Fed having to cut interest rates."
Judith Jones, senior vice president of Cleveland-based Society Asset Management Inc., has been telling her customers the year will be a good one for those in the market. She thinks a 6,000-point Dow is now in reach if consumer loan delinquencies don't start rising.
"That is not such a stretch anymore," Ms. Jones said. "It is do-able."
The Dow's surge has been helped by a continued flood into the market of pension fund and 401(k) money, funds that have been invested in stock mutual funds.
Last year alone, investors put $129 billion into stock mutual funds, and the trend appears to be continuing. That means mutual fund managers have mega-money to invest, and as they invest it, stocks rise. In effect, the infusion is feeding the market's rise.
T. Rowe Price Associates Inc., Baltimore's biggest mutual fund company and the third-largest in the nation with $50 billion in mutual fund assets under management, has received more than $1.4 billion since the year began.
Mr. Cripps said money managers are under pressure to put their cash in the market because their performance is judged against the markets.
"If they went into the year with a little bit of cash, they have gotten a lot of cash and they have got to invest it," Mr. Cripps explained. "They can't afford not to be in stocks."
Investors, too, are demanding results, especially if they have just gotten back in the market after having sold late last year thinking prices had peaked.
"Most investors who have sold in the past regret doing so and have been burned," Mr. Brown said.
'A buying panic'
Now, they are buying stock and holding it, which reduces the supply and drives up the price.
"They are getting back in and they refuse to sell; that magnifies the upside. All of these dynamics create what you call a buying panic," Mr. Brown said.
But yesterday, the buying panic was concentrated in the Dow stocks, which are the blue-chip holdings.
Caterpillar Inc., for example, jumped $3, to $67.625; DuPont Co. rose $2.625 to a high of $80.75 and Mobil Corp. climbed $2.25, to $115.625.
Meanwhile, the Nasdaq composite index, which is heavily weighted with high-tech stocks and those of smaller companies, rose just 0.78 points to close at a record 1,095.38.
Mr. Cripps said the strength in blue chips is a sign that investors are proceeding with some caution, because the blue chip stocks are seen as steady investments.
"There does not seem to be an over-speculation in this market," he said.
Market watchers worry that first-quarter earnings will be weak -- and could cool the Dow -- because retail and auto sales have slumped and bad weather, coupled with the federal government shutdown, kept consumers at home rather than in malls and restaurants.
The experts see single-digit earnings growth in the first quarter.
"I think the first quarter will be a real test of the market's endurance," said Ms. Jones, who manages three mutual funds with about $1 billion in assets.
Mr. Brown isn't so sure. He is bearish on the market and last year predicted that it would begin a 10 percent decline in January.
"The danger here is that this is a power move," he said.
"It is like everybody getting into a boat and rushing to one side. It creates dangers. This does not change my view of the market being risky."