As Dow nears 10,000, more relief than euphoria
By Vivian Chu
NEW YORK, Oct 15 (Reuters) - When the Dow Jones industrial average first finished above the landmark 10,000 level four years ago, Wall Street celebrated the event by showering confetti and "Dow 10,000" baseball caps onto the floor of the New York Stock Exchange.
But as the blue-chip index again approaches the milestone, few people are cheering. Many on Wall Street see the Dow's return to 10,000 as an event inspiring more hope and relief than heady celebration.
"The enthusiasm won't be the same as last time," said Frank Gretz, a technical analyst at brokerage Shields & Co. in New York.
"Everyone hopes we'll go back to the highs, but I don't think everyone is quite as euphoric as when we first went through 10,000 and the sky was the limit," Gretz said. "Back then, it was a real party atmosphere."
Stocks ended slightly lower on Wednesday, a day after closing at fresh highs this year. The Dow eased about 10 points to 9,803, after hitting a fresh 52-week high earlier in the day.
However, all three major market gauges -- the Dow <.DJI>, Standard & Poor's 500 <.SPX> and Nasdaq Composite index <.IXIC> -- have been on a steady climb since hitting their year lows in March, driven by hopes of an economic rebound heating up later this year.
The Dow rose for six straight months before September, when it dipped 1.5 percent. It last hit 10,000 on May 31, 2002.
MIND OVER MATTER
Most market watchers say the 10,000 milestone is important mainly for psychological reasons, and is not significant from a technical standpoint.
"Just because the Dow hits 10,000 doesn't mean momentum is back and the market will move higher. It's not a key resistance level," said John Caldwell, chief equity strategist at McDonald Financial Corp. in Cleveland, referring to a level in the stock market at which persistent selling occurs.
Still, the Dow hitting 10,000 will inevitably stir memories of the last time it hit that milestone.
The blue-chip index first crossed 10,000 on March 19, 1999 but closed above the 10,000 mark for the first time on March 29 that year, ending at 10,006.78.
The event sparked headlines worldwide, with stock exchange and government officials trumpeting the event as a triumph for American capitalism and U.S. financial markets.
Richard Grasso, then head of the New York Stock Exchange, said the Dow's milestone showed that the United States "was economically the model for the rest of the world."
When the Dow next hits 10,000, it could trigger selling from some investors who may use the milestone as an excuse to take profits, said Frederic Dickson, director of retail research at brokerage D.A. Davidson & Co. in Lake Oswego, Oregon.
"Some investors are eyeing visible targets to take some profits, and major market benchmarks will be target points for program selling," said Dickson, referring to computer-driven selling of groups of stocks by big institutional investors. "They're looking at 10,000 for systematic sells, since it's an easy-to-fix target."
Other analysts worry that the publicity surrounding the Dow's comeback will lead individual investors to pour more money into the market, in the belief that the go-go days of the late 1990s have returned.
Dickson said he has seen a 50 percent jump in fee-based activity among his clients in recent weeks, partly driven by the Dow's recent rally. "People are more confident about the good news they're hearing about the economy and reinforced by the averages moving up," Dickson said.
But after a bruising three-year bear market, most market watchers say that the Dow hitting 10,000 more than four years after it first hit the milestone is little reason to celebrate.
"The Dow hitting 10,000 doesn't carry the same euphoric value like it did the first time -- it's kind of like getting married a second time," said Gretz of Shields & Co. "All of the indexes are in a nice consistent uptrend, and there's just a sense of relief that we're finally recovered."
Copyright 2003, Reuters News Service |
