Does the Dow reaching 10,000 matter?
TEXT OF INTERVIEW
Bill Radke: We hear people call 10,000 a psychological barrier for the Dow — but is it really meaningful or just a number? Marketplace’s senior business correspondent Bob Moon is with us. Good morning.
Bob Moon: Good morning Bill.
Radke: Remind us where 10,000 fits in the Dow’s world historically?
Moon: Well you have to go way, way back to 1906 for the Dow first closing above 100 points, and it pretty much stayed there through World War II. It first got close to the 1,000 mark back in 1966, but it didn’t quite touch it. And it stayed in that trading range for about 15 years before it really surged. So it takes a long time for these milestones to be reached.
Radke: Well how important is a milestone like 10,000? We like to talk about it, it’s got lots of zeroes, but does it matter?
Moon: Yeah, it’s a big, round number. But most analysts are going to tell you that it’s purely psychological. On the other hand, you do have to look at the rally that we’ve seen in the last six months, and that is very real. I mean, you look at the Nasdaq, it’s up more than 35 percent since the start of the year. The S&P 500 up around 18 percent. So there is something going on out there. Analysts are wondering, though, what’s the staying power?
Radke: Do stock traders actually buy or sell based on a number like that?
Moon: Well I don’t think the big institutions do. But you do have to keep in mind that it does work as something of a promotional tool. It causes people like you and me to talk about the stock market. That gets people’s attention, and it makes them think, “Well, gee, maybe I need to get in on this.” So you can look at maybe an initial pop after the 10,000 mark.
Radke: And some people wondered: Oh, that is awfully high. Maybe we’re done for this rally.
Moon: Well that’s the other hand if you will. It’s a marker that can fan skepticism and make people think that we’ve come too far too fast.
Radke: Bob Moon is Marketplace’s senior business correspondent. Always great to talk to you Bob.
Moon: Thanks, Bill.
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