Analysts skeptical of recent Dow milestone

Monday, December 15, 2003

This year's rally in stocks, which hit a milestone when the Dow Jones industrial average passed 10,000, hasn't been strong enough to make Kevin Flynn forget about the money he lost in the downturn.

"Let's just say that three years ago I had about three times more money in one account than I do now," said Flynn, 41, of Martinez, Calif. "Things are going to have to get a lot better if I am going to be able to keep up with my friends in my retirement years."

The Dow, which measures the performance of 30 actively traded blue chip stocks, passed the 10,000 mark for the first time in more than 18 months on Thursday, closing up 86.30, or 0.9 percent, at 10,008.16. But market watchers who have seen this milestone before -- and watched it slip away -- were skeptical about the number's significance.

"The Dow index is simply a nostalgic unit of measurement," said Ernest Csak, a trader who was walking out of the New York Stock Exchange after the market closed.

The first time the Dow passed the 10,000 mark -- March 29, 1999, when it closed at 10,006.78 -- the exchange had "a party atmosphere," Csak said. "Today ... it was business as usual."

Csak said he follows other indexes more closely -- such as the Russell 2000, which measures the performance of small-cap companies, and the Standard & Poor's 500 index, a basket of 500 widely held stocks that provides a broad snapshot of the overall U.S. equity market.

Though traders downplayed the event, the Dow's move beyond 10,000 was likely to resonate with common investors, who have been looking for further evidence that the economy is improving.

"You can't minimize this cycle. I know it's just a number, and I know that most people don't even have any stocks in the Dow 30, but it's such a psychological lift for people, especially going into the holiday season," said Judi McDonald, who owns a financial consulting business in Hanson, Mass. "You know, perception is everything."

McDonald, a 57-year-old widow who considers herself a conservative investor, snapped up stocks in February after she'd sold some real estate last year. She'd cleared out her portfolio in December in order to cancel out the capital gains associated with the sale, and was thrilled to buy back companies she liked at very low prices.

"If you had done your homework, it was a very good time to be buying," McDonald said. "A lot of the companies had been punished beyond what was reasonable, just because when the market started to go south everyone jumped on the bandwagon."

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