Is Dow 10,000 Still a Meaningful Threshold?

Feb. 09, 2010 3:36 PM ETSPY, DIA, QQQ3 Comments
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Market Blog

By David Berman

You can forgive investors for shrugging at the sight of the Dow Jones industrial average crossing the 10,000-point mark on Tuesday. Aside from the fact that the 30-member index is not representative of the U.S. stock market or that psychological thresholds are really just round numbers, investors have seen Dow 10,000 more times than they can probably remember.

If the level deserves any attention, it’s because it now serves as a vivid reminder of how the U.S. stock market has drifted sideways over the past decade. A recap:

The Dow rose above 10,000 for the first time in its venerable history on March 29, 1999. Although it didn’t have a lot of exposure to technology names beyond Hewlett-Packard Co. (HPQ) and United Technologies Corp. (UTX) (Microsoft Corp. (MSFT) and Intel Corp. (INTC) were added later in the year), it nonetheless benefited from the dot-com boom that sent stocks soaring worldwide. The new level fed dreams about future thresholds. Among the more notorious, James Glassman’s Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market predicted that 10,000 was just the beginning.

It wasn’t, of course. The Dow crossed 10,000 on the upside eight more times by 2002, when the bursting of the dot-com bubble and the start of a brief U.S. recession – not to mention the 2001 terrorist attacks – sent the index retreating to a low of 7286 by October 2002.

That decline led to a classic V-shaped recovery in both the economy and the stock market, after the U.S. Federal Reserve cut interest rates drastically, also inflating a bubble in the U.S. housing market. On Dec. 11, 2003, the Dow crossed 10,000 again, marking a 37% rise from its 2002 low.

However, there were four more attempts to break the 10,000-point barrier in 2003 and 2004 before the Dow at last seemed to put the threshold in its rear-view mirror. After moving above 10,000 on Oct. 27, 2004, the Dow moved to a peak of 14,164.53 on Oct. 9, 2007. The housing market was strong, consumer spending was robust and the global economy was purring. What could go wrong?

Plenty, it turns out. The ensuing financial crisis and global recession seriously wounded American International Group Inc. (AIG), General Motors Corp. (GMGMQ.PK) and Citigroup Inc. (C), all of which were booted out of the Dow by June 2009. The index passed through the 10,000-point mark on the downside on Oct. 6, 2008, and didn’t stop there. It touched a low of 6547 on March 9 – marking a 12-year low.

Still, there’s nothing that coordinated moves by the world’s central banks can’t solve. Ultra-low interest rates helped feed a rebound in corporate profits that sent the Dow back above 10,000 on Oct. 14, 2009. But the index has struggled since then, moving above the threshold another five times by Tuesday.

Some investors may be dizzy. Others will simply notice that the 10,000-point level exerts a strong gravitational pull.

This article was written by

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Market Blog is a daily compendium of market news and analysis. You can find the blog at, the website of Canada's national newspaper The Globe & Mail, or at The Globe's investment website, Globe Investor. Market Blog is primarily written by David Berman. He has has been writing about business and investing since 1995. He began his career at Canadian Business magazine, where he wrote full-length features on a range of topics, from goose slaughterers to broadcasters. Later, he moved to MoneySense magazine, where his emphasis turned to investing. More recently, he worked at the Financial Post as an investing writer and daily columnist. He has a bachelor of arts degree from the University of Toronto and studied journalism at Ryerson University. David Parkinson has been covering business and financial markets since 1990, and has been with The Globe and Mail since 2000. A Calgary native, he received a Southam Fellowship from the University of Toronto in 1999-2000, studying international political economics. Simon Avery has covered telecom and technology for the Globe since 2004. Previously, he was a staff reporter for The Associated Press in Los Angeles and for The Wall Street Journal in San Francisco. He covered the boom and bust in Silicon Valley for the Financial Post between 1998 and 2001. Mr. Avery holds a Master's degree in journalism from Columbia University and a Bachelor of Arts in English and political science from the University of Western Ontario.

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