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Life Health > Life Insurance

Dow 13,000, and Other Magic Numbers

By Tom Nawrocki

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The Dow Jones Industrial Average achieved a significant milestone this week, when it broached the 13,000 mark for the first time in four years. There were reportedly cheers erupting on the floor of the New York Stock Exchange when the moment finally arrived, early Tuesday afternoon. Of course, they were shortlived, as the Dow promptly slipped back behind the magic number, and still hasn’t actually closed above 13,000.

In reality, there’s nothing magic about Dow 13,000, just as there was nothing magic about Dow 10,000 or Dow 1,000. The 30 individual stocks that make up the Dow all trade independently of each other and are entirely immune to such milestones. No one ever bought Coca-Cola stock in an attempt to roll the Dow over to a new level.

But to the extent that passing those psychological barriers signal renewed confidence on the part of both traders and investors, they are probably worth noting. A media celebration around the crossing of another thousand-point mark can help people understand and internalize the idea that the recession is over and the markets are rebounding. At any rate, it’s much more positive when we see the media taking note of these benchmarks on the way up than when we were noting them on the way down.

With Dow 13,000 out of the way, the next hurdle for the Dow to clear is 14,000. The Dow hasn’t closed above 14,000 since October 12, 2007. In fact, it’s only ever spent eight trading days above 14,000. The first came on July 19th, 2007, then it returned to that level on Monday, October 1st; Friday, October 5th; and the week of October 8th through the 12th, all in 2007. The peak close of the Dow came on October 9th, when it closed at 14,164. Two days later, on October 11th, the Dow reached its absolute highest point in intraday trading, when it touched 14,198. 

Here are some of the other closing landmarks the Dow has crossed – both on its way up and on its way down after the stock market crash of 2008-09:

  • 13,000 On the way up: April 25, 2007. On the way down: May 20, 2008
  • 12,000 On the way up: October 19, 2006. On the way down: June 19, 2008
  • 11,000 On the way up: May 3, 1999. On the way down: September 26, 2008
  • 10,000 On the way up: March 29, 1999. On the way down: October 3, 2008
  • 9,000 On the way up: April 6, 1998. On the way down: January 2, 2009
  • 8,000 On the way up: July 16, 1997 On the way down: February 9, 2009
  • 7,000 On the way up: February 13, 1997. On the way down: February 27, 2009.
  • 6,000 On the way up: October 14, 1996. On the way down: Thankfully, we never dropped this far.
  • 5,000 On the way up: November 21, 1995
  • 4,000 On the way up: February 23, 1995
  • 3,000 On the way up: April 17, 1991
  • 2,000 On the way up: January 8, 1997
  • 1,000 On the way up: November 14, 1972
  • 500 On the way up: March 12, 1956
  • 100 On the way up: January 12, 1906

Looked at in that format, you can see how precipitous the collapse of the Dow was back in 2008. Back in the spring of 1999, we were all thrilled that the index was able to gain 1000 points in just over a month, when it shot up from 10,000 to 11,000 – yet nine years later, it gave back all that same ground in the space of a week.

You can also see that the Dow doubled, going from 5,000 to 10,000, over the course of about three and a half years, from November 1995 to March 1999. By contrast, going from 1,000 to 2,000 took just over 24 years; going from 500 to 1000 took 26 years.

The Dow, of course, has also lost half of its value in recent years, from that 14,198 peak to 7,099, which it crossed in the middle of the day on March 2, 2009 – at which point it kept plunging down. The milestone we are nearing that is even more significant than Dow 13,000 is that, probably sometime in the next week or so, the index will be up 100 percent from its bottom in the midst of the financial meltdown.

The magic number for that is 13,098, which is exactly double the Dow’s nadir of 6,549, which it hit on March 9, 2009. The Dow used to take around 25 years to double; during the dotcom bubble, that was cut to around three and a half years. Now we’re looking at the Dow doubling itself in a little less than three years. That may be at least partly  testament to the frightening speed with which it lost all that value, but it’s still nice to see it come roaring back. 

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