The Dow Jones Industrial Average Hits 40,000 Points: A Milestone in Stock Market History

Key Takeaways

• The Dow Jones Industrial Average topped the 40,000-point level at Friday’s close for the first time in its history.
• Originating way back in 1896 and often considered a barometer of the overall U.S. economy, the index tracks the performance of 30 blue-chip companies.
• The last major milestone for the Dow occurred in November 2020, when the index closed above 30,000.

The Dow Jones Industrial Average closed above 40,000 points on Friday for the first time in its 128-year history of tracking some of the largest companies trading on the U.S. stock markets. The index ended the trading day at 40,003.59. The last time the Dow (DJI) closed above a major milestone was on Nov. 24, 2020, when the blue-chip index first pierced 30,000. Since then, it took the index 874 trading days to reach its latest round-number landmark, according to a Wall Street Journal analysis.

When the widely followed Dow reaches a major round number like 40,000, it often garners significant attention from investors and the financial media. Although such milestones do nothing to alter the fundamentals or drivers of the market, they can have a psychological impact that influences investor attitudes and behaviors.

Dow Rally Rode AI Wave Despite Recession Fears

The Dow’s climb to the 40,000-point level coincided with what could have been a challenging environment for stock market gains. From March 2022 through July 2023, the Federal Reserve aggressively raised interest rates in a campaign against soaring inflation. Fed rate hikes translate to higher borrowing costs, making it more difficult for companies to finance their growth.

However, concerns that the higher interest rate environment could sink the U.S. economy into a recession never materialized, the jobs market remained strong, and inflation gradually showed signs of cooling off—helping the Dow defy the odds to continue its march higher.

In addition to the surprising economic resilience, optimism around artificial intelligence (AI) has helped underpin the stock market rally. Expectations that AI could boost productivity and provide an array of profitable opportunities have benefitted many companies—especially the Magnificent Seven group of stocks, which includes Dow components Amazon (AMZN), Apple (AAPL), and Microsoft (MSFT).

Previous Milestones for the Dow

The Dow’s trip past 30,000 signaled a dramatic recovery in November 2020. In March, the index had sat at 19,000 amid COVID-19-related restrictions. The surge coincided with positive vaccine news and the removal of uncertainty following that year’s election.

The Dow first traded above 20,000 on Jan. 25, 2017. The index reached that level thanks to sharp gains following the election of President Donald Trump the previous November, as investors were optimistic that plans for tax cuts, deregulation, and infrastructure spending would boost corporate profits.

Investors may have been partying like it was 1999 when the Dow first crossed the 10,000-point mark on March 29 of that year. It’s worth noting this was around the height of the dot-com bubble, which would burst around a year later and send markets tumbling.

Tracing the Dow back to the 1,000-point level requires a trip back to Nov. 14, 1972. This achievement followed shortly after the election of President Richard Nixon, and cheers reportedly broke out on the floor of the New York Stock Exchange to mark the occasion.

The Dow Jones Industrial Average hitting 40,000 points is a significant milestone in stock market history. It reflects not only the strength of the U.S. economy but also investor confidence in the future. As we look ahead, it will be interesting to see how the Dow continues to perform and what new milestones it may reach in the years to come.

Read the original article on Investopedia.