By Dan Strumpf
The Nasdaq Composite climbed above the 5000-point level for the
first time in almost 15 years on Monday, another milestone in the
revival of an index that once was synonymous with dot-com excess
but 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. EST, before retreating. It was the first time the index has
traded at that level since March 27, 2000.
The index recently traded 19 points higher, or 0.4%, to
4983.
The Dow Jones Industrial Average rose 110, or 0.6%, to 18243, on
track to close at a new high. The S&P 500 index gained seven
points, or 0.3%, to 2111. U.S. stocks were buoyed by deal activity
and economic data that was broadly in line with expectations.
The Dow industrials 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 1.3% of its all-time
closing high of 5048.62, set on March 10, 2000.
The index's Monday gain was helped along by some high-profile
deal announcements. Lifting the Nasdaq was a 16% surge in shares of
NXP Semiconductors NV after it and Freescale Semiconductor Ltd.
agreed to a merger that would create a company with combined market
value of more than $30 billion. Freescale shares rose 11%.
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."
The Nasdaq's march back up to 5000 has been deliberate, driven
by steady growth in earnings and dividend payments at the companies
it lists. Although the index's ascent is nowhere near as rapid as
it was 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 industrials
advanced 5.6%--its best month since January 2013--and the S&P
gained 5.5%, marking its strongest performance since October
2011.
The gains have coincided with a decline in market volatility--a
positive development for passive index investors, but a difficult
one for faster-moving traders such as hedge funds. "At midday, it's
God-awful, nothing moves," said Joe Saluzzi, partner at the
brokerage firm Themis Trading.
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 Coté, 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 1.8% gain in Visa Inc. shares gave a lift to the industrials
on Monday, contributing more than 30 points to its gains. Costco
Wholesale Corp. named Citigroup Inc. and Visa Inc. as its new
credit partners. Citi shares gained 1.6%, while Costco 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%.
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 ended mixed. Germany's DAX gained 0.1%, to close
at a record, while France's CAC-40 fell 0.7%.
A surprise interest-rate cut by China's central bank 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."
Cardinal Health Inc. agreed to acquire Johnson & Johnson 's
heart-product business for $1.94 billion in cash. Cardinal shares
rose 1.5%, while those of J&J gained 0.7%.
The yield on the 10-year Treasury note rose to 2.062% as prices
fell.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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