Dow's 10,000 mark seen as anticlimatic

by Paul Flemming

SBJ Staff

How now Dow?

The Dow Jones Industrial Average an index of 30 large companies' stock prices closed March 29 at 10,0006.8, its first close at greater than 10,000 points. In subsequent days the average did not hold and the Dow closed down 93.52 and 127.1 March 30 and 31, respectively, to end at 9,786.2 March 31.

"The Dow hitting 10,000 is kind of the anticlimax," said Rick Gutman, senior vice president in charge of Commerce Bank's investment management group in Springfield. "We saw the exuberance earlier in the year when the Dow was in the 9,000s."

Springfield investment managers and financial officers said broad generalizations could be drawn from the milestone and noted that the DJIA represented a relatively narrow snapshot of the market.

"It is a measurement based on 30 companies. No one owns the market, you invest in companies," said Dwight Rahmeyer, chief executive officer of Trust Company of the Ozarks. But "a part of the underlying strength of companies accounts for the performance of the markets."

"It signifies some of the fantastic optimism (investors) have for the economy," Gutman said. However "with our models that we use, it's not significant."

"Economists say the Dow's record close is significant because it highlights the surging U.S. economy: low inflation, low unemployment and government surpluses," said Doug Wilburn, Missouri's commissioner of Securities in the Office of Secretary of State.

"I don't disagree. However, I believe that, for the individual investor, the Dow's record close is much more significant because it reminds us all that it pays to be a long-term investor."

The U.S. Commerce Department announced March 31 that corporate profits were down 2.2 percent in 1998, the first annual drop since 1989. Rahmeyer said the announcement may indicate more normal returns compared to recent years' double-digit earnings increases.

Nonetheless, the Dow average commanded attention. Media and the public are fascinated with what are perceived to be milestone numbers.

"We tend to think of things in 10s 10 percent, 100 years in business, the millennium," Gutman said.

"In recent years, as with so much in society, the news cycle has sped up," Wilburn said. "Today we get scrolling stock tickers on all news cable channels, minute-to-minute reports about the Dow, the NASDAQ, big stock, small stocks, initial public offerings and stocks on the move."

Rahmeyer said he began his career in financial services in 1982 when the Dow Jones Average went over the 1,000 mark for good. "People were asking the same questions then," he said.

The Dow first closed above 1,000 in 1972, then dropped for the intervening decade before being able to sustain that level.

"People are obviously jittery just because it's a new benchmark," Rahmeyer said of the 10,000 level and the subsequent days' retreats. "It takes a while to develop a position."

Jim Batten, vice president of finance and chief financial officer of O'Reilly Automotive Inc., said the Dow average has a generally positive effect on O'Reilly's stock. "When it went over 10,000, it was good for our stock," he said. Even though "oftentimes our stock does not track the Dow."

O'Reilly trades on the NASDAQ market. Batten said "the most meaningful things are in our sector" of auto-parts retailers. When news is released related to that industry, it has a greater affect on O'Reilly's stock price than broader indices such as the DJIA.

Still, "our stockholders, when they say the market's down, they're talking about the Dow."

The Dow Jones Industrial Average reflects a formula involving 30 stocks traded on the New York Stock Exchange. The companies include AT&T, Boeing, Coca-Cola, IBM, McDonald's and Wal-Mart Stores.

The Index began in 1896. It is named after Charles Henry Dow and Edward Davis Jones, founders of Dow Jones & Co. A tip sheet the two began in 1882 became The Wall Street Journal in 1889.

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