The Dow hit a fresh milestone early Wednesday, cracking the 22,000 barrier for the first time in its 121-year history.
So-called "Dow 22K" is the latest sign that the stock market's long climb that began in March 2009 and that has gained momentum this year amid a global economic recovery continues to charge ahead.
Just after Wednesday's opening bell on Wall Street, the Dow climbed as high as 22,016.66.
The latest milestone for the blue-chip stock gauge, which includes iconic U.S. companies like Apple, Boeing, Coca-Cola, McDonald's and Johnson & Johnson, ignited a fresh debate on Wall Street as to whether the stock price run-up has more room to run or if a market top is nearing.
Heading into today the Dow Jones industrial average was up 11.1% for the year. It is up 236% since its bear market low of 6547.05, which means a $10,000 investment would be worth $33,600 now.
Joe Quinlan, chief market strategist at New York-based U.S. Trust, downplayed the significance of the Dow's latest 1,000-point climb. The reason? It represents just a 4.2% gain since it topped 21,000 on March 1.
What would worry Quinlan, however, would be if investors on Wall Street and Main Street get overly excited and start to pile into the market and quickly push the Dow up another 3,000 points.
"Chatter about Dow 25,000 would worry me," he says, calling it "a sign of a market top" and "too much exuberance."
Currently, the Dow's advance is being powered by better business conditions, recovering economies and improving corporate profits in the U.S. and overseas.
A weakening dollar against a basket of foreign currencies is also helping boost profits at big U.S. companies like McDonald's and Boeing that do a lot of business abroad. That's because it makes their products more affordable when purchased with stronger currencies. The Federal Reserve's patient approach to raising interest rates -- which are still near historic lows -- is also providing support for stocks.
Stock market optimists say the Dow's current rally is based on improving sales and revenues for U.S. companies and not irrational exuberance like the dot-com stock hysteria back in 2000.
Says Donald Luskin, chief investment officer at TrendMacro in Chicago, "Don't let the milestones cause you to miss the simple underlying story: corporate earnings are at all-time highs. So stocks are at all-time highs." That's how it is supposed to work, he adds.
Stocks "can work their way higher, maybe much higher" if interest rates stay very low and central banks around the world continue to provide stimulus to markets, adds David Kotok, chief investment officer at Cumberland Advisors, an investment firm based in Sarasota, Fla.
Milestones are fun to celebrate, but they don't necessarily tell you where the market is headed next, says Lindsey Bell, an investment strategist at CFRA, a market research firm in New York.
"I don't think it foretells the next leg of the market," says Bell.
Risks still remain. The Dow, in addition to getting pricey relative to the earnings streams of its 30 components, also faces potential risk from the inability of Washington lawmakers to work together and get things done, she says. The delay in getting many of President Trump's economic agenda items passed through Congress could also weigh on stocks, as a lack of tax cuts and infrastructure spending could curtail growth, Bell adds. Potential budgetary gridlock in coming months could also spook investors.
Critics of the Dow's recent assault of 22,000 note that it is a "price-weighted" index -- which means its up and down moves are driven largely by its most expensive stocks -- which distorts the true health of the index and the broader market.
For example, Boeing, which is now the Dow's highest-price name at $239.44 per share, soared nearly 25% in July and had surged more than 14% in the four trading days after its strong earnings report on July 26 -- accounting for a big chunk of the Dow's gains in its final run to 22,000.
"The Dow is a flawed index where price matters and nothing else," says Mark Arbeter, president of Arbeter Investments, a Holland, Pa., firm that analyzes the health of the market by stock chart patterns, trading volume and trendlines. In the past five trading days, the Dow has gained nearly 278 points, and Boeing, itself, accounted for 205 upside Dow points in that period.
"When should an index be dominated by one stock? Never," says Arbeter.
Investors should also never get overly confident, no matter how strong the stock market is acting, warns U.S. Trust's Quinlan.
"Investors tend to forget about risk levels as markets hit new highs every session," says Quinlan.