Nicole Wachs watches the DJIA march towards (or away from?) the big one. 
Markets are abuzz this week with the question: will the Dow Jones Industrial Average (DJIA) top 10,000? Although largely symbolic, a lot hangs in the balance for many investors if we do cross this limit.
A Dow smashing through the 10,000 mark would signal to some that we’re officially leaving the Great Recession behind, and that the economic recovery – of which the stock market is often a leading indicator – is underway. To others, though, Dow 10,000 provides confirmation that the recent bull market is officially overheated, signaling a long-overdue correction. Worse than that, it may also usher in the much-dreaded “double-dip recovery”.
So who’s in which camp, and what’s the skinny? Here’s a quick rundown to get you up-to-speed on this hot debate.
CNBC provides an excellent summary of the (brief) history of Dow 10,000, including a review of the 30 Dow Jones component stocks that constitute this key index now. The WSJ advanced some theories of drivers advancing Dow 10,000 (or holding it back, depending on your point-of-view).
Stocks have shuffled in and out of the Dow since 1999 with the very first Dow 10k. Kraft (KFT), Microsoft (MSFT), Intel (INTC) and Home Depot (HD) are relatively new to the Dow; other stocks, like Sears Holdings (SHLD) have been dropped or, like Allied Signal (now part of Honeywell (HON), don’t even exist anymore.
Many investors focused on oil and energy stocks that emerged strong from Monday’s trading session, including Massey Energy Co. (MEE, Walter Energy Inc. (WLT) and Peabody Energy Corp. (BTU), Rowan Cos. (RDC), Tesoro Corp. (TSO) and Cabot Oil & Gas Corp. (COG) (reported by the blog Ub-news.com). Others are saving their attention for the big earnings announcements due this week, including financial giants J.P. Morgan Chase (JPM), Goldman Sachs (GS) and Citigroup (C).
…And some folks are blasé about the whole thing. Seeking Alpha’s Globe Investor points out that Dow 10,000 is much less important, than the broader S&P 500 crossing a key threshold. After all, the S&P tracks a full 500 stocks, while the Dow tracks only 30 – many of whom have been shuffled in or out in recent years.
What’s your take? Do you think Dow 10,000 is an important indicator, whether technical or just psychological? Or are you shrugging off the drama and keeping your eyes on those earnings numbers for proof of where this market’s heading?
Regards,
--Nicole Wachs
Director of Education
All-Star Commentator
In reading content in the Trader Network, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.
