By Dan Strumpf And Saumya Vaishampayan
The Nasdaq Composite climbed above the 5000-point level for the
first time in almost 15 years on Monday, marking a milestone in the
revival of an index that once was synonymous with dot-com excess
but which now reflects a broad swath of global technology,
consumer, health-care and financial firms.
The Nasdaq Composite, which tracks the prices of the 2,571
companies on the Nasdaq Stock Market, briefly topped 5000 at 10:30
a.m. ET, peaking at 5000.33 before retreating. It was the first
time the index has traded at that level since March 27, 2000. The
Nasdaq traded recently up 30 points, or 0.6%, to 4994.
The Dow Jones Industrial Average rose 112, or 0.6%, to 18245,
while the S&P 500 index gained eight points, or 0.4%, to 2112,
as U.S. stocks were buoyed by deal activity and economic data that
was broadly in line with expectations.
The Dow Jones Industrial Average and the S&P 500 index each
have set several dozen new highs over the past few years, driven by
a growing U.S. economy, healthy corporate profits and exceptionally
easy Federal Reserve policy.
Now the Nasdaq Composite has crept to within 1% of its all-time
closing high of 5048.62, set on March 10, 2000--a development that
few analysts and traders forecast only a few years ago.
The index's Monday gain was helped along by some high-profile
deal announcements. Lifting the Nasdaq was a 14% surge in shares of
NXP Semiconductors NV after it and Freescale Semiconductor Ltd.
agreed a merger that would create a company with combined market
value of more than $30 billion. Freescale shares rose 9.8%.
Despite the push above 5000, traders reported relatively light
activity Monday, consistent with a weekslong downturn in trading
volumes and more subdued moves in stocks.
"You've got the deal in the Nasdaq...and there were no waves to
rock the boat over the weekend," said Michael Antonelli, sales
trader at Robert W. Baird. "The market's not flying on volume. It's
certainly not nonstop action, but that's kind of how it's been with
these markets that grind higher."
Nasdaq's march back up to 5000 has been deliberate, driven by
steady growth in earnings and dividend payments at Nasdaq-listed
companies. Although the index has taken far longer to gain these
heights than it did in 2000, its gains are viewed as likely less
ephemeral and bearing less risk for shareholders. Nasdaq companies
collectively fetched 120 times their earnings over the previous
year in March 2000, compared with about 23 currently.
Monday's broad market gains mark an extension of last month's
rally. In February, major benchmarks posted their biggest monthly
percentage gains in more than two years. The Dow advanced 5.6%, its
best month since January 2013 and the S&P gained 5.5%, marking
its strongest performance since October 2011.
Stocks have been helped by fourth-quarter earnings that were
better than initially feared, steadily improving economic data and
indications from the Federal Reserve that it will take a
slow-and-steady approach to raising interest rates.
"We're in a virtuous cycle for economic data, led by employment
trends," said Doug Cote, chief market strategist at Voya Investment
Management, which oversees about $220 billion. "You add the bonus
from low gas prices...then this market is going to continue to do
well."
A 1.7% gain in Visa Inc. shares gave a lift to the Dow on
Monday, contributing more than 30 points to its early gains. Costco
WholesaleCorp. named Citigroup Inc. and Visa Inc. as its new credit
partners. Citi shares gained 0.7%.
Stocks remained higher after the Institute for Supply Management
said its manufacturing index edged down in line with expectations
to a reading of 52.9% from 53.5%. Investors eyed data that showed
U.S. consumer spending fell in January. Personal spending fell 0.2%
from the prior month, the Commerce Department said Monday.
Economists surveyed by The Wall Street Journal had forecast a 0.1%
decline in spending.
Economic data this week will culminate with Friday's jobs report
for February. Economists polled by The Wall Street Journal expect
employers to have added 230,000 jobs last month. The unemployment
rate is seek ticking down to 5.6%.
European stocks fell, with France's CAC 40 down 0.8% and
Germany's DAX slipping 0.1%.
A surprise interest-rate cut by China's central bank highlighted
concerns about growth in the world's second-largest economy. The
People's Bank of China said it would cut a quarter of a percentage
point from benchmark lending and deposit rates, less than four
months after the last reduction. The central bank pointed to
looming deflation as a trigger for the move. China's rate cut
boosted stocks in Shanghai and Hong Kong.
"It's not going to really impact the growth picture here," said
Steven Rees, global head of equity strategy at J.P. Morgan Private
Bank, referring to the U.S. Still, the rate cut "removes one more
concern, about China potentially impacting the U.S. recovery," he
said, which has been a slight drag on sentiment.
Cardinal Health Inc. agreed to acquire Johnson & Johnson 's
heart-product business for $1.94 billion in cash. Cardinal shares
rose 1.8%, while those of J&J gained 0.3%.
The yield on the 10-year Treasury note rose to 2.058% as prices
fell.
Write to Dan Strumpf at daniel.strumpf@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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