Dow Closes Below 10,000 Mark

N E W   Y O R K, March 14, 2001 -- How low will the Dow go?

Almost exactly two years to the day after the Dow Jones average of industrial stocks first reached the symbolic 10,000 level, it closed under that mark today, again losing more than 300 points in the middle of a disastrous week for investors.

Continuing Monday's wipeout on Wall Street, the Dow ended the day at ended the day at 9,973.46, down 317.34 from Tuesday's close.

The nation's best-known market indicator has thus dropped below a level that once represented the seemingly inevitable upward movement of stock prices. And some analysts say the carnage could continue.

"I wouldn't be surprised at all," says Bill Meehan, chief market analyst for Cantor Fitzgerald, a Manhattan-based trading and research firm.

"You're looking at valuations that are still pretty lofty," concurs Sam Stovall, senior investment strategist for Standard & Poor's.

The Dow opened today at 10,290.80, but quickly plummeted in early trading and after a brief morning rally spent much of the day on the short side of 10,000.

And the index is down nearly 700 for the week, following Monday's whopping 436-point drop.

It is the first time the Dow has closed under 10,000 since Oct. 18, 2000. While the figure may have seemed out of sight to market analysts several years ago, investors have taken it for granted over the last two years.

Then: 'A New Bull Market'

When the Dow first reached 10,000 on March 16, 1999, traders hollered and paused from their activities for a round of applause.

At the time the Dow hit five figures, the economy was booming and market analysts were flush with optimism.

"We are in a new bull market," declared Ralph Acampora, chief technical analyst of Prudential Securities, in March 1999. "This could be the start of a 'mega-market' lasting 12 to 15 years, similar to the boom markets that followed the First and Second World Wars."

Indeed, with the markets still in the midst of a sensational run, the Dow, an index of 30 leading industrial companies, reached its highest close ever on Jan. 14, 2000, at 11,722.98.

The Dow has since dipped under 10,000 on a few occasions since then, although it has rebounded every time.

But in 2001, everyone following Wall Street sees the stock market's peak as the classic bubble that burst.

"The 15 months from November 1998 to March 2000 was not typical," says Meehan. "We're just going to retrace that movement."

While the Dow peaked in January 2000, the onset of its steady deterioration took place in March of that year, the same month the Nasdaq index, largely composed of now-reeling technology stocks, hit its peak.

Stovall adds that the Dow may follow the pattern set by the two other most prominent market indexes: "The Nasdaq was first to go through a bear market, the S&P second, and with the Dow having added more high-tech names, it could be next."

That would involve the Dow dropping to slightly under 9,400. A bear market is defined as the loss of 20 percent of the peak value of an index.

The Market Doesn't Want to Hear It

Some analysts say the current market woes will force investors to scrutinize their portfolios more carefully, rather than simply assuming any stock investment will pay off.

"More people are receptive to the idea that they should have a strategy, which is a positive," says Charles W. Kadlec, chief investment strategist for J. W. Seligman & Co. in New York, and co-author of the book Dow 100,000: Fact or Fiction?

The bad news for investors is that few analysts see a major market surge coming in the immediate future, chiefly due to the uncertainty of the economy.

"The market doesn't want to hear that things are fine," says Meehan.

And Kadlec suggests the Federal Reserve has been slow to recognize the nation's economic problems: "The market is telling the Fed the Fed funds rate should be lower," says Kadlec.

Fed chief Alan Greenspan is expected to announce a lowering of key interest rates next week, which could provide some relief for Wall Street.

Kadlec, for one, also hopes President Bush's proposed tax-cut plan could act as a market stimulus, although the impact of a possible tax cut would not be felt right away.

But for short-term investors who got into the marked in the last few years hoping to make a quick killing, long-term forecasts do not provide much consolation.

"People are crying in their beer, and they have legitimate reasons to," concludes Meehan. "They gambled and lost."