9,768 and anxiously counting

NEW YORK – Rona Crystal often wondered when stocks would recover after the three-year bear market ravaged one-third of her financial portfolio. Now that the Dow Jones industrials have climbed back near the 10,000 level, she is more optimistic about the market’s outlook.

“I’m feeling pretty good about the market,” said Crystal, 53, a database programmer in Brighton, Mass., who began to look more avidly into buying stocks in June as the market pushed upward.

“I’m trying to be cautious, though. I just feel like I don’t want to get that mind-set that it’s going to go forever,” Crystal said.

Nearly four years after the Dow hit a peak of 11,722.98, only to give up its gains and tumble below 7,300, investors are feeling more confident again. And with the Dow nearing 10,000, many believe the worst might finally be over.

“Fundamentally, it’s not a very significant event, but psychologically, the 10,000 mark is huge,” said Lynn Reaser, chief economist and senior market strategist at Banc of America Capital Management. “It would represent a symbol that the bull market has returned.”

“For investors, it sends a signal that if they have been skeptical of the economy’s and the market’s recovery, those fears should be at rest. For businesses, it helps spark confidence and increases an aptitude for capital spending.”

It’s a contrast from the first time the Dow hit the 10,000 mark on March 29, 1999. At the time, the promise of the new economy and the coming millennium offered the hope of vast market riches. Even skeptics felt obligated to jump in to avoid missing the next big rally.

But after crossing the 11,000 mark in early 2000, the Dow stumbled lower amid a dot-com crash and weak corporate profits. The blue chip average bounced above and below the 10,000 level dozens of times – most recently crossing the mark in May 2002 – before plunging to a five-year low of 7,286.27 on Oct. 9, 2002.

Now investors are less exuberant. They still buy tech shares, but in moderation; and many are getting back into the market, but are doing so while meticulously keeping their portfolios diversified.

Their caution was evident in recent weeks as the Dow pushed near the 10,000 mark. After hitting a 2003 high of 9,858.46 on Nov. 3, the Dow has lurched up and down as investors wonder if stocks are a bit overvalued.

“Dow 10,000 is not as significant as the first time. Back then, people had never seen the number before and it seemed like an impossible dream,” said professor Robert Shiller at Yale University, author of “Irrational Exuberance,” which predicted the bursting of the tech bubble in early 2000.

“But it doesn’t feel the same now. What we’ve seen is a reaction to good economic news,” he said. “But it’s the same sort of excitement in terms of any other market rally.”

There are many reasons for optimism. Short-term interest rates are at a 45-year low. Congress recently slashed taxes on stock dividends. And Wall Street appears to be in the beginning stages of recovery, unlike the late 1990s, when many experts warned of a market bubble that could quickly collapse.

Indeed, many analysts believe the economy will to grow an average of about 4 percent and operating earnings will be up about 12 percent, which they say will lead to moderate stock market gains in 2004.