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Rally on: Dow hits highest level since October 2008

March 17, 2010 | 11:22 am

Better late than never, if you're a bull: The Dow Jones industrial average, playing catch-up, is finally following the rest of the market to a new 17-month high.

The 30-stock Dow was up 78.75 points, or 0.7%, to 10,764.73 at about 11:20 a.m. PDT on Wednesday, surpassing its previous 2010 closing high of 10,725.43 reached on Jan. 19.

If the rally holds the Dow will close at its best level since Oct. 1, 2008, when it finished at 10,831.

[UPDATE at 1:30 p.m.: The Dow finished at 10,733.67, up 47.69 points, eking out a new 17-month high  amid another broad advance on Wall Street.]

Stocks slumped from Jan. 20 to Feb. 8 on renewed worries about the U.S. economy and fears that Europe’s sovereign-debt mess (Greece, etc.) would trigger a new credit crisis.

Wallstemboss But since Feb. 9 markets here and abroad have been off to the races again, to the enormous frustration of the bears, who believe it’s all smoke and mirrors. They said that last year, too.

Many broader U.S. indexes, including the Standard & Poor’s 500, the Russell 2,000 and the Nasdaq composite, reached new 17-month highs in the last two weeks, and have kept going.

The Dow, however, has struggled. As a price-weighted index, the Dow’s trend heavily depends on the moves of its highest-priced stocks. And those shares, for whatever reasons, have been laggards this year.

IBM, at $128.77 on Wednesday, is the Dow’s highest-priced issue. It’s down 1.6% for the year, while the S&P 500 is up about 4.8%. Other high-priced Dow stocks still in the red this year include 3M, Exxon Mobil and Chevron.

The big money in this rally has been made in smaller stocks, which market bulls say is a classic bet on a strengthening domestic economy -- and skeptics say is just a sign of rank speculation.

The Russell 2,000 index of small-company shares is up almost 10% year to date, more than three times the Dow’s gain.

-- Tom Petruno

Photo credit: Mark Lennihan / Associated Press