Wall Street Blows Off Sequester

The message from Wall Street to Washington is Sequester does not matter as the Dow Jones Industrial Average blasted to its all-time high of 14,253.77, driven by strong corporate earnings, a compliant Federal Reserve and a belief that even Congress’s intractable budget wars can’t blow up a recovering U.S. economy.

The persistent stock market rise — breaking the old mark of 14,198.10 — comes as welcome news to corporate America and workers checking their 401(k) statements. But it complicates President Barack Obama’s message that the $85 billion in sequester spending cuts, which took effect March 1, could hurt the U.S. economy, which grew at just a 0.1 percent rate in the fourth quarter of last year.

“There is a consensus that the sequester is just a modest drag on economic growth and that it’s not really all that serious,” said Bill Galston, a fellow at the Brookings Institution and a former economic adviser to President Bill Clinton. “I think the White House campaign against the sequester has been more amateur than usual in the sense that it had featured a number of demonstrable factual errors that have undermined the credibility of the entire case.”

(WATCH: Sequester scare: Obama team drives home message)

Galston and others noted, however, that the market’s rise from the depths of the 2008-09 financial crisis, when the Dow bottomed out around 6,500, does not necessarily reflect the experience of average Americans.

Some of the rebound can be attributed to the Federal Reserve’s relentless campaign of buying less risky assets and driving investors into equity markets, the so-called sugar high effect. Corporate revenues are soaring in part because companies drove down costs and strictly limited hiring, helping explain why unemployment remains stuck near 8 percent.

And many of the big blue-chip companies that make up major stock market indices draw a growing amount of their profits from outside the U.S., meaning positive developments in Europe and Asia often outweigh any negative headlines out of Washington. “There is a substantial gap between the well-being of corporate America and the well-being of the rest of America,” Galston said.

Read more: