What would 10,000 mean for Dow?
The first time the Dow Jones industrial average entered five-figure territory, corporate bigwigs tossed hats that said "Dow 10,000" to cheering traders on the floor of the New York Stock Exchange.
That was a decade ago. Traders could soon see 10,000 again soon, but any celebrating would be more relief than an expression of brimming confidence.
The Dow stands about 500 points shy of the 10,000 mark, putting the milepost on investors’ radar for the second time in a year. Here are some questions and answers about what it would mean for the Dow to hit 10,000.
When did the Dow first close above that level?
March 29, 1999, in the midst of a powerful market rally that would end with the dot-com collapse at the start of this decade.
What would it mean this time?
Some analysts say it holds little significance given how far the market remains from its peak almost two years ago. But many contend that seeing Wall Street’s best-known thermometer roll back to five digits could inject traders with confidence.
"It’s like a century rather than 99 years. There’s not that big of a difference but there’s a big difference psychologically," said Dan Cook, senior market analyst at IG Markets in Chicago.
Should a climb past 10,000 make investors more confident?
Analysts are divided. But it would certainly feel better than when the Dow skidded 370 points on Oct. 6, 2008, to close below 10,000 for the first time in four years.
But some say reaching 10,000 would make them nervous that the market was overheated.
What would be needed to push the Dow above 10,000?
Investors will need to see more signs of an improving economy, because the market tends to bounce back as the economy is getting ready to recover from a recession. Investors need reassurance that they’ve been right to buy into the market.
Recent economic readings have signaled that the recession could be ending.
"It’s good news that the market has reached 9,500, but it’s particularly good news that it’s confirmed by most of the important economic numbers we’re looking at," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, N.Y.
Should average investors prepare in some way for the Dow at 10,000? Should they even care?
Long-term investors shouldn’t react to day-to-day moves in the market, but it could be a good time to prune portfolios. Most financial advisers say it’s wise to pull money from the strongest performers and funnel some of it to other investments. That helps guard against letting one part of a portfolio carry too much weight.
What if it doesn’t happen?
Filed under: money by Fred