On this day in economic and financial history:
Ten thousand … at last! The Dow Jones Industrial Average finished in five digits for the first time in its history on March 29, 1999, finally clearing a hurdle that had proven too high in recent days, as the market fretted over the profits of the index’s blue chips. While IBM had held back the index on its previous efforts at 10,000, it led the March 29 charge to a close of 10,006.78, by posting a 3% gain, despite minimal news.
Optimism reigned on Wall Street that day. Prudential analyst Ralph Acampora told CNNfn that “10,000 is no longer the ceiling. . . I think it’s the floor for the market over the next five to 10 years.” On PBS NewsHour, financial journalist Gretchen Morgenson noted that Dow 10,000 “reflects the really amazing strength of the U.S. economy. We have had an almost uninterrupted eight-and-a-half years of growth in this country.” It certainly seemed that the sky might be the limit in a market that had already doubled in five years, and would become one of the greatest sustained bull market rallies in Dow history. Oil mergers, a strong dollar and, of course, the surging high-tech sector, all contributed to the Dow’s rise to 10,000, and would propel it nearly 2,000 points higher before the rally ran out of steam.
However, not everyone was a bull that day. The Wall Street Journal, in an op-ed published the following day, cautioned that “Dow 10,000 could be remembered as a high-point not of investor triumph but of market excess.” Over the following decade, this bearish outlook would prove correct. Exactly 10 years later, the Dow was, in fact, more than 20% lower than its close on March 29, 1999, having only days earlier started its rebound from a devastating financial crash that had produced the second sub-five-digit period of that decade.
That decade would result in some ill-considered component swaps, most notably one in the winter of 1999 that added Microsoft and Intel at the height of their dot-com valuations, and the inclusion of Citigroup with that same change as the result of its Glass-Steagall-destroying merger with Travelers. It was a time of tremendous upheaval in the stock market, and the Dow felt the pain of change as acutely as had millions of supposedly conservative portfolios over this “lost decade.” The last time the Dow closed below 10,000 points was early June of 2010. Will it fall beneath that mark again? Only time will tell.
The birth of mathematical finance
Louis Bachelier successfully defended his thesis, titled Theorie de la Speculation, on March 29, 1900. The best explanation of this essay’s importance to the world of finance was offered a century later by several French mathematicians in honor of the centennial of its defense:
The date March 29, 1900, should be considered as …read more
Source: FULL ARTICLE at DailyFinance