The Dow Jones industrial average leapt toward the magic 10,000 mark Thursday but fell shy of the biggest round number ever for the blue-chip indicator.
Nevertheless, the most popular measure of stock market activity advanced 124.60 points, or 1.3 percent, to 9897.44, another closing record.
“The 10,000 mark is psychologically important and could give a little bit of a lift to investors,” said Hugh Johnson, chief investments officer at First Albany Corp. “It is more than just a number, but not much more. Once it is passed, 10,000 passes into history.”
The Dow’s dance with 10,000 is being watched closely not only by traders, but by many individual investors as well.
“I think it’s a number where there will be a little bit of a fight to get over it, but by the middle of next week, I think, we will do it,” said Joanne Alberstein, who had stopped into a West Loop office of broker Charles Schwab & Co. to check on a trade.
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“The economy is pretty strong–we’re in a happy mode,” said Alberstein, a Near North Side resident whose portfolio includes some Dow 30 companies and a lot of companies traded on the technology-heavy Nasdaq stock market.
Investor Art Newey of LaGrange was a little more cautious, predicting the Dow will break 10,000 within the first six months of the year, then drop back as companies try to deal with Year 2000 computer problems.
“It’s a psychological milestone, but I’m not sure it means a heck of a lot,” he said. Still, he admitted, “I watch it every day.”
Propelled Thursday by gains in Coca-Cola, American Express, and its oil giants, Chevron and Exxon, the Dow reached a high of 9935 during the day before backing off in a round of profit-taking and then resurging near the close.
A surprisingly strong report on retail sales and expectations that oil production cuts will help the laggard energy sector provided fuel for the rally as trading began.
The broader-based Standard & Poor’s 500-stock index also closed at a record high, rising 10.84, to 1297.68, after surpassing 1300 for the first time and pulling back.
Computer-technology stocks were all over the lot. After showing a loss in midafternoon, the Nasdaq composite index managed to finish with a small gain of 6.25, at 2412.25.
Smaller stocks hardly moved. The Russell 2000 index of such issues eased 0.04, to 401.08.
Winners beat losers by about a 3-2 ratio on the New York Stock Exchange, where volume came to 902.6 million.
“There has been a lot of cash parked in money-market funds that started to come back into the market when the Dow passed its old high last Friday,” said Marshall Front, managing director of Trees Front Associates. “With the current momentum, Dow 10,000 can easily be reached at any time.”
Front noted that some market commentators, once again, are calling for a correction because the market is overvalued. But, he said, they have a hard case to make in the face of continued low inflation, steady interest rates and an improving picture for corporate profits later in the year.
But First Albany’s Johnson said he believes the landscape is starting to change. Particularly, he said, a whiff of more inflation is in the air with energy and commodity prices starting to creep up.
“Patient investors–and there aren’t many–should be rewarded with some financial, commodity and energy stocks when the environment is less favorable on inflation and interest rates,” he said.
Although the Dow industrials only flirted with 10,000 Thursday, a derivative product, the Dow futures contract, pushed past that benchmark at the Chicago Board of Trade, drawing cheers from traders who had competed fiercely among themselves to be the first to push the marker to five digits.
The June contract, which trades at a premium to the actual Dow, hit 10,000 at 11:30, marking the first time an actively traded Dow futures contract broke that mark.
“The whole exchange was looking over here and cheering when five numbers went up on the board,” said trader Robert O’Bryan.
Enthusiasm pushed the contract to 10,045 by 11:40.
“We were all long, and then we had to sell down,” said John Zawaski, a broker in the pit. The contract slid back below 10,000 by 1 p.m. and didn’t bounce back above that mark until near the 3:15 closing bell, ending the volatile, high-volume day at 10,018.
“There was a lot of excitement in there today,” said trader Ross Levitt.
“Technically it’s just another number, but emotionally, it’s a huge number,” trader Dennis Davitt said after the close.
Even bigger, of course, would be a breakthrough by the actual Dow.
“I’ve got to think it could be” Friday, said trader Peter Meyer, chairman of the Dow futures pit.
At the NYSE, financial-service stocks helped lead the rise. American Express bounded up $5.87, to $123.50, accounting for 26 points of the Dow’s gain. And Citigroup pushed up $1.94, to $65.94.
Front pointed out that Citigroup has jumped 33 percent in the last three months and is up 75 percent from last year’s lows “when it was hit by financial crises in Russia, Asia, and Brazil. Investors have discovered that the world did not end for Citigroup.”
Coca-Cola, Thursday’s big gainer among consumer stocks, rose $3.69, to $66.37, after an analyst upgraded it.
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Big-oil stocks continued this week’s move higher on hopes that producing countries, for once, can actually cut production as they promised, Exxon rose $1.44, to $74.75, and Chevron tacked on $1.81, to $85.06.
Locally, United Stationers advanced $1.06, to $17. The Des Plaines wholesaler of business products said it plans to buy back up to $50 million of its shares.