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The Honolulu Advertiser
Posted on: Monday, November 19, 2001

Recovering stock market looks toward 10,000

By Amy Baldwin
Associated Press

NEW YORK — As investors' optimism about the economy and enthusiasm for stocks grows, Wall Street's rallies are carrying the Dow Jones industrials back toward 10,000.

That milestone, a symbol of the stock market's accomplishments over the past decade, stands now as a goal in the recovery from the economic slump and the Sept. 11 terrorist attacks.

The blue chips haven't closed above 10,000 since Sept. 5, ending that day at 10,033.27. And it was just a week ago that the Dow regained the last of the 1,369 points lost in the first week of trading after the attacks.

But 10,000 might be a barrier until an economic recovery is certain — many financial experts say it has more psychological rather than fundamental importance for the market.

Stock professionals pay more attention to statistics such as prices relative to earnings growth, and technical factors such as resistance levels.

"Since the market is ruled by major, institutional accounts like pension funds and mutual funds with billions of dollars in assets, those money managers are not going to be turned on by a number," said Larry Wachtel, market analyst at Prudential Securities.

Besides, he said, there's no repeating Wall Street's euphoria over the first time the Dow claimed 10,000, closing at 10,006.80 on March 29, 1999. And investors surely realize that the Dow is still far off its record high of 11,722.98 set Jan. 14, 2000.

"This has been a battleground for years now," Wachtel said.

Analysts are looking for signs of real strength in the market and the economy.

For those like Wachtel, that means seeing companies post year-over-year profit and sales growth. Strength also means a decrease in inventories and rise in consumer spending.

Positive economic signs are starting to emerge, including last week's big jump in retail sales and better-than-expected earnings from Hewlett-Packard. The Commerce Department reported retail sales rose 7.1 percent in October, the biggest-ever monthly advance and a contrast to the 2.2 percent decline in September.

Meanwhile, technical analysts like Richard A. Dickson of Hilliard Lyons in Louisville, Ky., are eager for the market to break levels of resistance, or spots that major market indicators have had trouble piercing or staying above.

The best gauge of resistance, Dickson said, is the 200-day moving average, the term used to describe a stock or a market index's average performance over 200 days. Just before the attacks, the Dow was outperforming the 10,000 level, having a 200-day moving average that ranged between 10,200 and 10,500.

So, even if the Dow comes back to 10,000 its performance will still be subpar compared with recent performance, which is why Dickson is looking for the blue chips to blow past 10,200.

"That would really indicate that you have strength in the market," he said.