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Published: 4/13/2006

Dow index far in front as stock market rebounds

Most stocks got clobbered in the bear market of 2000-2002, but despite some investor jitters in recent months, the Dow Jones industrial average is within 5 percent or so of its all-time high.

But other major indexes - the Standard & Poor's 500-stock average and the Nasdaq composite index - are still pretty far off their records.

"It's just a matter of time before the Dow gets back to it's high," said Mark Evans, director of investments for the Trust Co. of Toledo in Springfield Township. "Whether it happens this year or next is anybody's guess."

Other brokers and economists tend to agree:

The Dow has proven more resilient than the other indexes, partly because of its mix of stocks, and partly because of the factors that led to the bear market in the first place.

Even though smaller stocks outperformed the Dow in this year's first quarter, the widely watched blue chip index, composed of 30 large stocks, has rebounded nicely in recent years. For the first quarter, it rose 3.7 percent, compared to 4.2 percent for the S&P 500 and more than 10 percent for small stocks in general.

However, late last week the Dow looked to be headed for six-year highs until it was derailed by investor worries over inflation more interest-rate boosts from the Fed, high oil prices, and more problems in Iraq.

Even so, it ended yesterday at 11,129.97, just 5 percent below its peak of 11,722.98, set Jan. 10, 2000 - a vast improvement from its depths in October, 2002, when it was down 38 percent.

The S&P 500 closed yesterday at 1,288.12, and the Nasdaq closed at 2,314.68.

The Dow stocks tend to pay higher dividends than those in the other indexes, which prompts investors to pay a bit more for those securities, said Michael Holly, branch manager in Holland for Wachovia Securities Financial Network.

But the Dow and the S&P 500 look to be valued fairly on the basis of earnings, he added.

The Dow stocks are trading at an average of 23 times last year's earnings, and the S&P stocks are at 18 times earnings. Both are at 15 to 16 times projected 2006 earnings, or just about the historic level.

Wallen "Buzz" Crane, senior vice president in Smith Barney's Toledo brokerage, said stock averages are headed higher.

His firm's research affiliate, Citigroup Research, projects the Dow to end 2006 at 11,900 and the S&P 500 to top 1,400.

Richard DeKaser, senior economist for National City Corp. in Cleveland, said the Dow looked relatively good compared to other averages because it didn't go down nearly as far. He predicts the S&P 500 will hit 1,425 by year's end and 1,500 next year.



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