Dow 10000: The Sequel

The Dow Jones Industrial average closed above 10,000 today for the first time since October 2008. After having watched the blue-chip benchmark cross the magical five-digit figure numerous times in both directions over the past 10 years, the predominant reaction from market watchers has been a collective shrug.

Wall Street’s recovery hit its biggest landmark yet on Wednesday as surprisingly strong earnings from Intel and JPMorgan Chase and September’s positive retail sales data pushed the Dow above five digits for the first time in a year.

They’re right to be skeptical. Too much is made of the psychological impact of round numbers, whether its Dow 10,000 or S&P 500 1100. Technical analysts rarely focus on the Dow — with only 30 stocks, it’s too narrow to be of much use. And when they do, they focus on trends (focusing on when long-term and short-term trends in the Dow clash) or levels of support and resistance.

Anyone who thinks this is irrelevant is likely a fool,” says a senior Wall Street analyst. “[Dow 10,000] magnetizes prices towards it for many months if not years to come once [it’s breached].”

Today’s Markets
The Dow Jones Industrial Average rose 144.80 points, or 1.47%, to 10015.86, the S&P 500 added 18.83 points, or 1.75%, to 1092.02 and the Nasdaq Composite picked up 32.34 points, or 1.51%, to 2172.23.

While one round number doesn't mean all is perfect in the economy, recapturing the psychologically-important 10000 level underscores how much has changed since the Dow plummeted to a 12-year low of 6547 just seven months ago.

“There is a large percentage of people who don’t watch the stock market everyday who have become disenchanted. This will be a wake-up call that things have gotten better,” said Art Hogan, chief market strategist at Jefferies & Co.

Wednesday's rally, like much of the surge off the bear-market lows, was fueled by the latest signs the Great Recession is over and the economy is recovering. The headlines were nearly all positive as Intel issued an upbeat guidance and beat on earnings and revenue, JPMorgan Chase blew away expectations with its results and the government said retail sales fell by less than expected last month.

“I think people are clearly beginning to feel better about their future. I think that bodes well for a pretty good first-half of 2010,” NYSE trader Doreen Mogavero told FOX Business. “Although I was not on this bandwagon for the first half of this rally, I’m beginning to think this is the real thing.”

Many traders have been closely watching the 10000 threshold, pointing to level’s psychological importance. The Dow hadn’t traded above that level since Oct. 7, 2008 -- just three weeks after the implosion of investment bank Lehman Brothers -- and hadn’t closed above it since Oct. 3, 2008. It first crossed 10000 in March 1999, when oil was trading at just $16.44 a barrel and the Y2K bug was one of the economy's biggest threats.