The Importance of 12,000 on the Dow Jones
A day after the Dow Jones closed about 12,000, stocks traded in a narrow, virtually flat range. The pause in the rally provided time for some equity growth funds to breathe, many of which have realized returns greater than 3.5%, which is roughly what the S&P 500 has gained so far this year.
Despite the flat performance for the Dow, Nasdaq and S&P 500, many of the most popular holdings among equity mutual funds continued their climb. Securities like IBM pared earlier losses and Google was up $2.88 at 2:20pm EST. Even tech darling Apple fluctuated between losses and gains throughout the day.
Some have called for a major correction, citing a recent increase in foreclosures as well as a surprise jump in unemployment claims as one reason why the economy and markets cannot continue along this aggressive upward trend. That same news has been cited by some as being offset by positive new home activity, a more active resale market as well as private sector job growth, just announced on Wednesday by ADP.
In light of the strong market gains, companies like AOL and Electronic Arts have reported strong earnings, and with mergers and acquisitions activities out of companies like Johnson & Johnson, the prognosis certainly appears positive for equity markets. This is further supported by low implied volatility, or VIX, which was down today for the third straight day.
The ideal play in a market like this one is to stay invested, regardless of short-term market fluctuations. With indicators are strong and positive as they are, mutual fund investors can realistically sit tight and wait for those quarterly statements to trickle in sometime in April.
Edited by Chris Blanchet. Contact Chris at chris(at)mutualfundsite(dot)org.
