DJIA at 10,000: What's next?

NEW YORK -- The Dow Jones Industrial Average cracked 10,000 Tuesday, propelled by a record eight years of U.S. economic growth, a boom in high technology and investor enchantment with the Internet.

It was there for just under a minute, and never went past 10,001.78. But that was enough to make traders on the floor of the New York Stock Exchange cheer, wave their hands and toss hand-ripped confetti.

As often happens after such milestones, sellers took over, and the index of 30 blue chip stocks ended the day down 28.30 at 9,930.47. That's 69.53 points short. Still, veteran observers were pleased with the breakthrough. "It's just a number, but hitting 10,000 says to me it's continued confirmation that the bull market is alive and well," said Alfred E. Goldman, director of market analysis, A.G. Edwards & Sons in St. Louis. By reaching five digits, the Dow is now up 8 percent this year on top of an unprecedented four straight years of double-digit growth. The index was pushed over the top by everyday events of the business world that often prompt buying -- announcements this week of corporate mergers and the promise of healthy earnings reports from big companies such as Union Carbide. But these were just the immediate causes. The Dow 10,000 rocket was launched early in the decade, fueled by a growing economy combined with low inflation and interest rates that kept consumers spending and corporate profits rising. The rise of personal computers and technology improved Corporate America's productivity even as manufacturing jobs steadily declined. The market got an additional boost in the past year through an explosion of enthusiasm for the Internet as hundreds of companies put a ".com" after their names, expecting a big payoff by selling everything from Furby dolls to stocks on the World Wide Web. America Online, for instance, went from $16 a year ago to $105 now. Yahoo, the online directory service, has gone from $21 to $175. But economic troubles in Russia, Asia and Latin America threatened several times over the past two years to halt the Dow's advance. The Dow fell below 7,500 as recently as Oct. 8, but then stocks rebounded on a series of three interest rate cuts by the Federal Reserve. The recent perception that the troubled foreign economies were beginning to rebound also allowed the Dow to resume its climb. To most market analysts, the Dow's ascension to 10,000 is more of a curiosity or media event. "The 10,000 mark is absolutely a psychological milestone," said Jan Holman, vice president of investment services at American Express Financial Advisors in Minneapolis. "But for most investors, it's just another day." Some individual investors were underwhelmed. "It doesn't affect the long-term view," said Mark Harchelroad, interviewed outside a Fidelity Investments office in Manhattan. A Dow at 10,000 inevitably raises questions of what happens next. One cause for concern is the fact that the market's recent gains have been concentrated in a few business sectors, most notably Internet and high-tech stocks. That leaves many other stocks lagging behind, particularly those of smaller and younger businesses. "You have to be resigned that this is going to be a very focused advance. Clipping 10,000 is not going to change that," said Eugene Peroni at Janney Montgomery Scott in Philadelphia. Arguing in favor of even higher stock prices is the ever-growing stock ownership of individuals. Roughly 43 percent of U.S. households now own stock or mutual funds and millions believe that the stock market, despite occasional downturns, is the best place to earn money for retirement, college and other needs. Banks cannot match the double-digit returns stocks have provided. Still, some fear that the fascination for the Internet that has driven the market's recent gains could also be its undoing. Online traders now account for more than 14 percent of all stock trades and many were just toddlers during the last big bear market of the 1970s. Some market pros fear these investors will click their way out of the market fast if they see signs of a decline. Ralph Acampora, director of technical research at Prudential Securities, disagrees. "It's a real industry," he said Tuesday. "They're not making hula hoops. Some of these companies will survive, but not all of them." Other pros point that that the investing public today is much more savvy, thanks in part to an abundance of financial news available instantly on cable TV and easy access on the Internet to sophisticated stock research that was once the preserve of professional investors. "It doesn't scare me," said Lorraine Baran, a Manhattan computer consultant, said of the possibility of another Dow plunge. "If it took a dip, I'd probably buy more."

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