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Dow hits record high despite budget cuts now in effect

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    What's behind increase?

  • Duration 3:55
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Right now -- record breaking day on Wall Street the Dow jumping more and then 140 points this morning surpassing an all time high reached in 2007 before the big crisis the big banking situation all of that so now -- we recover that lost ground.

And then some today the -- gaining steam over several weeks.

As we've been warned to be affects -- sequester cuts which include asking -- of hundreds of thousands of job losses.

And lower economic growth so why -- juxtaposition why are we seeing a market rally despite these dire economic warnings might Angelina -- congress for.

Yahoo! finance so what does -- let's -- now at this cricket.

Yeah it's obviously it seems like it's a little bit of a divergence here between these two news items but what I think you have to keep in mind -- does been rising for four years now right we -- sort of a generational low four years ago.

And business profits have actually.

Kept pace with the Dow -- mean the Dow was essentially reflected the fact that corporate America has remained strong lots of cash all the rest the other thing with regard to sequester is.

There are offsets for one thing we saw this coming from so far away.

It's a very broad.

And very kind of pervasive but in any one area not a huge impact in terms of dollars that impact.

Big companies I think that's why the market has taken it in stride and be so far.

And -- I think is more is going to -- invested this year vs last year in housing construction then we're losing in the stimulus.

It's interesting so let's take it piece by piece because I think a lot of people on on main street US -- talk about that a lot during -- crisis right maybe not feeling.

You know 141300.

That sort of feeling -- I'm a record Dow today I'm sorry about my job worried about economic growth.

Why is that just typical of that what we -- expect I wouldn't say it's too.

We didn't really see this major threat to the economy that is so fresh in our minds right now because it just happened a few years ago.

But you know big business has moved on money is very cheap -- -- you can't overlook the fact that the Federal Reserve and other central banks out there.

Keeping interest rates at rock bottom levels making sure monies available to the system right now is system not necessarily today getting -- and I'll see -- -- getting into.

Corporate coffers.

Not directly necessarily.

Feeling like it's getting to every household although you know if you look at auto loan volumes if you look at the availability of mortgages it's better than it would otherwise be.

Okay let's talk about what to expect one analyst said this is a hot rock and pop.

Market were hopping now -- at record high we could see correction -- five to 10% he says over the next couple.

Months which is -- -- to potentially make you nervous if you see it and then we'll see a pop at the end the year.

What do you think about that model.

I think it's plausible I mean for one thing we have gone pretty far short period of time since mid November of the market's up 15% or so it's actually not really backed off very much lot of folks looking it's for signs that that'll happen.

I do think it's plausible that we do at some point have to retrench a little bit the big question here is.

Does the market get a big public embrace which it has not had this hope of winning aimed at that meeting does the average person who has money in savings decide to put more into stocks or not I don't think it's magic if that happens but it hasn't really happened in the last several years.

Did you market is telling us and and limitations of course of but the market -- tops or do you think that in you know the market in America is saying.

Bring on more cuts -- cancel at DC.

I honestly don't think that's the immediate message -- do you think if the cuts come incrementally or if they're over a long period of time as you know congress agrees with the president for something over ten years.

Absolutely you can accommodate that but I don't think the market right now is celebrating.

The secrets -- ration cuts I think it's more -- it's considered to be just not very immaterial to the things that matter right today.

For stock investors like axiom -- -- senior work on Yahoo! of course.

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