Dow Tops the 10,000 Mark--for a Minute
The champagne was on ice, but the team couldn’t hold a ninth-inning lead.
A rally that carried the Dow Jones industrial average through the magic 10,000 barrier in early trading Tuesday fizzled out by afternoon.
The Dow closed at 9,930.47, down 28.30 points, after reaching a record intra-day high of 10,001.78 in the first half-hour of trading.
The floor of the New York Stock Exchange broke out in cheers, and traders tossed torn-paper confetti at 9:50 a.m. Eastern time when the Dow milestone was reached.
After staying above 10,000 for only a minute, however, the blue-chip index receded.
“It’s called reality,” said Peter Coolidge, managing director of equity trading for Brean Murray & Co. “Everybody expects something to happen, but somebody actually has to do the doing.”
The doing didn’t get done most conspicuously in financial services stocks. After leading an 82-point rally Monday that brought the Dow to within 42 points of 10,000, the Dow’s three financial stocks dragged it down Tuesday.
American Express fell $2.19 to $123.56, Citigroup slid $1.44 to $64.50 and J.P. Morgan was off $1.38 to $124. Together, the three lopped 24 points off the Dow.
Citigroup fell despite the company’s late-afternoon announcement that it had authorized $2 billion more in stock buybacks on top of $900 million in repurchases already this year.
The market is “really lacking leadership,” said Edward Riley, chief investment officer at BankBoston Corp. Except for a few familiar names--predominantly in technology and health care--the market overall has been weak all year, he noted.
Tuesday’s session was particularly disappointing because stocks had a lot going for them.
Bond yields retreated, with the 30-year Treasury bond easing to 5.47% from 5.51% on Monday. That yield now is the lowest since Feb. 23.
Also, key foreign markets continued to rally. Japan’s Nikkei-225 index jumped 1.9% to 16,072, its highest close since Aug. 3. Stocks were also strong in Mexico, Brazil, Germany and South Korea.
And one of Wall Street’s most respected strategists, Abby Joseph Cohen of Goldman Sachs, told Reuters that “the bull market is not over” because the economy’s fundamentals remain solid.
Yet declining stocks outnumbered advancers by 17 to 13 on the NYSE on Tuesday and by 22 to 17 on Nasdaq. NYSE volume was weak.
The Standard & Poor’s 500 index slipped 0.1%, and the Nasdaq composite edged up 0.3%.
With only 30 stocks, the Dow is by definition a narrow index. Several market watchers pointed out that with IBM and Hewlett-Packard as its only pure tech names, the Dow has missed most of the surge in that sector in recent years.
“If it had a few more tech stocks, 10,000 would have been crossed long ago,” said John C. Bogle, senior chairman of mutual fund giant Vanguard Group.
The tech-heavy Nasdaq index is up 11.3% so far this year to the Dow’s 8.2% gain.
History buffs note that other “big” Dow numbers have proved to be stumbling blocks for the market. For example, after first hitting 100 in 1905, the Dow took 19 years--until 1924--to convincingly burst through that mark.
Dow 1,000 was the object of another agonizing flirtation. The index first touched that level in the middle of a trading day in 1966 and again in 1968 before finally closing above it in November 1972.
Will the 10,000 mark prove to be a similar barrier?
There’s no particular reason why it should, market technicians say.
To Richard T. McCabe, chief market analyst for Merrill Lynch, for example, the main significance of Dow 10,000 is that it “fills the space between 9,999 and 10,001.”
If the milestone makes lots of headlines, however, “it could sow the seeds of its own destruction” by attracting investors who had been skeptical of the market, McCabe said. When the last skeptics are finally won over, he added, it often spells a market top.
Peter J. Anderson, chief investment officer at American Express Financial Advisors in Minneapolis, said he thinks there is “just enough energy in the market” to get it over the 10,000 mark.
But the current bull market is “very, very extended, and the leadership is even more extended,” Anderson said. Continuing the rally will be next to impossible with only a relative handful of stocks participating, he added.
Among Tuesday’s highlights:
* Big-name tech issues were a bright spot, with Microsoft up $3.19 to $169.06, Applied Materials up $3.06 to $63.63 and Texas Instruments up $4.81 to $104.25.
* In the Internet sector, Net service provider FlashNet Communications soared $26.63 to $43.63 on its first day of trading.
* Union Carbide, a Dow stock, added 50 cents to $44 after saying it expects first-quarter earnings to be near the high end of expectations, though below year-ago results.
* Among Southland issues, brokerage Jefferies Group jumped $4.31 to $49.50 and 99 Cents Only Stores slid $3.75 to $39.75.
Market Roundup, C7
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Split Market
The Dow index may close above 10,000 soon, but that will be little consolation to owners of smaller stocks--many of which have fallen this year despite blue chips’ rally. How key indexes have fared year-to-date:
Nasdaq telecom: +22.6%
Nasdaq composite: +11.3
Dow industrials: +8.2
S&P; 500: +6.3
Wilshire 5,000: +4.8
NYSE composite: +3.1
Dow utilities: -3.5
S&P; mid-cap: -6.5
S&P; small-cap: -8.1
Source: Times research
