Matt Krantz, USA TODAY
The bull market's most dramatic sign of strength yet is showing up in a big-round number: 16,000.
The Dow Jones industrial average jumped back above 16,000 Thursday and closed there for the first time in the much-watched average's history. The market is being lifted as investors applaud the fact unemployment benefits fell to levels not seen in two months. It's just the latest major market milestone to fall in the ongoing bull market that has been powered by low valuations in the wake of the 2008 financial crisis in addition to a simulative Federal Reserve and improving housing market.
Reaching 16,010 at the closing bell, the Dow clocked a 0.7% gain on the day, up 109 points.
The S&P 500 is just shy of its own even-number threshold that it has yet to surpass at the close, 1800. The index gained 0.8% for the day to end up at 1796.
A third major index, the Nasdaq composite, gained the most on the day, rocketing 1.2% to 3969.
"People may discount milestones, but they are physiologically significant," says Todd Salamone of Schaeffer's Investment Research.
The Dow took out the 16,000 level just 198 days after toppling the 15,000 barrier on May 7, 2013, says S&P Dow Jones Indices. Watching the Dow power past 16,000 is just another brutal reminder to investors who've been calling for a correction of how wrong they've been and how they've missed out on a historic bull market. The Dow's rise Thursday snaps what had been a three-day losing streak.
Seeing the market charge higher may start to get investors, who have avoided stocks since the 2008 financial crisis, to perhaps wade back in, says Ken Winans of Winans Investments. "16,000 is the catnip to the retail investor. When people talk about the Dow, they don't talk about Dow 15,9995. They care about Dow 16,000," he says. "Those that missed this rally will call their brokerage and jump in."
The market's rise has been staggering too, given the number of problems the economy and investors had to look past. "The whole market has climbed a wall of worry, including a fiscal cliff, interest rate worries, government shut downs," Winans says. "There have been many reasons for this market to blow up, and it hasn't," he says.
Meanwhile, the bearish investors who have clung to what are supposed to be safe investments have been hammered. "Gold is down. Muni bonds are down. Long bonds are down. People are saying, 'What I thought was safe is not safe at all.' "
The market's rally has also been a bitter pill for naïve investors calling the market a bubble and saying it's at risk of a financial crisis, just because it was rising, Salamone says. Just because the market is moving higher doesn't mean it's overinflated, he says.
In fact, many measures of market sentiment still show that investors are bearish, Salamone says. Flows into U.S. stock mutual funds are still slow relative of the outflows the previous few years and the amount of investors placing bearish bets on stocks is higher now than it was at the start of the year, he says.
"We wouldn't be surprised if there's hesitation as indexes challenge round numbers," Salamone says. "But we'd stay on the long (buying) side."