On Wednesday, 14 October 2009, the Dow Jones industrial average broke through the 10,000 level for the first time in a year, closing at 10,041 on 20 October.
When this landmark five-figure level was first achieved, back in March 1999, investors were riding the dot-com bandwagon at full speed and the breakthrough was met with champagne and cheering on the trading floor. This time around, in the wake of the financial crisis that saw the US equity market reach a closing low of 6547 in March, the mood has been more quietly optimistic.
There are plenty of indicators suggesting that the most likely direction from here is up. The catalyst for the push above 10,000 was an expectation-beating set of earnings from JPMorgan in the three months to the end of September. But this was a mere gust in a tailwind that included consecutive months of upbeat economic news and generally robust earnings across most of the Dow’s constituent sectors, with key bellwethers Google, Intel and Goldman Sachs all putting in strong showings in third-quarter results. The 10,000-point mark is also seen by some traders as a support level from which the market can target further gains.
On the other hand, there are analysts who see the 10,000 point breakthrough as little more than a psychological nicety – after all, the Dow closed below this point at the end of last week. Another concern is that the expectation-beating earnings are largely thanks to the radical cost-cutting measures being implemented by business leaders rather than any fundamental improvement in revenue growth. Finally, there are those who point to the vast injection of government funds still flowing through the US economy. There is little doubt that the Dow would look less healthy were it not for the various fiscal stimulus packages supporting US business.
So can the US market continue on its upward trajectory, or will the phased withdrawal of government funds scupper the recovery?
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Last updated: 21/10/09
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