New York Stock Exchange

The Dow is closing in on the 10,000 level again over ten years after it first breached the threshold in March 1999.

The 30-component Dow Jones Industrial Average closed up 124.17 points, at 9,789.36, on Monday, boosted by news of two large mergers. Abbott Laboratories, the drug maker, agreed to acquire a unit of Belgium's Solvay for $6.6 billion, and then Xerox, the photocopier company, announced plans to buy Affiliated Computer Services, a business services outsourcer, for $6.4 billion.

The third quarter earnings season will begin next week and S&P 500 companies are expected to be down 24.7%. Many analysts however, have been talking up the prospect of upside surprises. The quarter ends tomorrow and the reporting season starts with Dow component and aluminum giant Alcoa, on Oct 7th.

Of the S&P 500 companies, 73% reported positive earnings surprises in the second quarter.

Fed and Treasury support will continue to underpin the recovery in shares, which most on Wall Street are unlikely to acknowledge.

The New York Times says that the enthusiasm over the level of 10,000, is now a decade-long phenomenon. Reporter Jack Healy said: Consider this: President Bill Clinton was in office when the Dow first closed above 10,000 in March 1999. It retreated in the years after the dot-com bubble deflated, then retook 10,000 in late 2003 and peaked at 14,000 in October 2007. We all know the cataclysm that followed.

So Dow 10,000 does not mean that the market is finally edging ahead; it is simply catching up to where it was a decade ago. “It’s been a bad 10 years, a really bad 10 years,” said David Bianco, chief United States equity strategist at Bank of America/Merrill Lynch.

Healy says the constant march of inflation also dilutes the meaning of 10,000. Prices rose an average of about 2.8 percent each year in the last decade, meaning the Dow would have to reach about 13,200 in today’s numbers to equal its value then. If this limbo seems dreary, imagine spending the next decade talking about Dow 10,000.

In 1966, the Dow came within 20 points of hitting 1,000; it moved above 1,000 in 1972, but it wasn't until 1985, that it exceeded 1,500.

The Dow peaked at 381.17 on Sept 3, 1929. It crashed on October 28 and 29, 1929, falling from 301 to 230 or 23.6%

One year after the peak, the Dow closed at 237.54, down 37.3% from its peak. It continued to slide until July 8, 1932 where it bottomed at 41.22, down 89.2% of its value over 2.5 years

The Dow did not cross above 381 again until Nov 23, 1954, over 25 years after its 1929 peak.

Dow Jones Milestones from 1896

Some think trouble could come sometime in 2010, as optimism among investors gains momentum at about the same time the government will be trying to wean the markets off support provided since the financial crisis hit.

“There is maybe more trouble ahead as we look to the second half of 2010. I am urging clients, while the sun is out now, to benefit from it and get more risk in your portfolios”  - - and then be ready to hunker down some time next year, Jeffrey Kleintop, chief market strategist at brokerage firm LPL Financial in Boston, told The Wall Street Journal.

Bloomberg News says the steepest rally in the Standard & Poor’s 500 Index since the 1930s is restoring Byron Wien’s reputation as a stock picker.

Wien, hired by Blackstone Group LP last month, said he’s keeping his January forecast for a 33% annual gain in the benchmark index for US equities, implying a 13% advance from yesterday’s close. More than six months ago, the S&P 500 needed to rise 77% to reach Wien’s year-end prediction of 1,200.

“In March, that didn’t look too good, and people wouldn’t make eye contact with me,” said Wien, 76, vice chairman of Blackstone Advisory Services and the former chief market strategist for hedge fund Pequot Capital Management Inc. “But now, with three months to go, that looks like it may be realized. The horse is corporate earnings and economic activity. The horse drives the cart.”

People only like their forecasts to be remembered when they turn out to be accurate, within a reasonable margin.