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, rose 44.57 points, or 0.9%,
to 5008.10. It first crossed 5000 just after 10:30 a.m. EST,
marking the first time the index has traded at that level since
March 27, 2000.
The Nasdaq's rebound underscores the renewed ascendancy of U.S.
financial markets following the twin crashes of 2000 and 2008 as
well as the repeated U.S. debt-ceiling standoffs in recent years.
The dollar, measured by the WSJ Dollar Index, has surged more than
17% over the past year, as investors around the globe have poured
funds into U.S. assets in anticipation that an uneven U.S. recovery
will shift into higher gear.
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.
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 26 today, according to FactSet.
"A grounded rally is probably a decent way to put it," said Hank
Herrmann, CEO of Waddell & Reed Financial, which manages $125
billion. "There's certainly not anything bubble-ish going on in
valuations of the big-cap technology stocks."
On Monday, the Dow Jones Industrial Average rose 155.93 points,
or 0.9%, to 18288.63. The S&P 500 index gained 12.89 points, or
0.6%, to 2117.39. Both benchmarks notched fresh all-time highs.
The Nasdaq's gain on Monday was helped along by a high-profile
deal announcement: Nasdaq-listed NXP Semiconductors NV surged 17%
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 12%.
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're seeing across-the-board strength in tech. It's been the
place to be," said Angel Mata, head of institutional equity trading
at Stifel Nicolaus. But he added: "As the market continues to move
higher, volume starts to go to the side. Those that are long want
to stay long because they've made enough mistakes selling stocks
too early. And the buyers don't really want to chase."
The slow pace at which the Nasdaq crossed 5000 is emblematic of
the shifts in the market. When the Nasdaq last topped 5000 on March
10, 2000, it gained 3.1% in a single session. Then, it took a
little more than two months for investors to lift the index from
4000 to 5000; this time around it has taken more than a year. "I'm
not seeing a melt-up at this juncture," Mr. Herrmann said.
"Valuations are much, much more attractive relative to then."
The Nasdaq has risen 295% since U.S. markets bottomed in March
2009. That compares with gains of 213% in the S&P 500 and 179%
in the Dow industrials over the same span.
Among the signal developments of the recent rally is the
emergence of Apple Inc., which is the most valuable company in the
world with a market capitalization of $758 billion, more than the
Nos. 2 and 3 U.S. firms, Exxon Mobil Corp. and Microsoft Corp.,
combined. The Cupertino, Calif., consumer-electronics firm, which
accounts for a 10th of the Nasdaq index, recently posted a record
U.S. quarterly corporate profit of $18 billion.
Apple isn't alone in showing financial strength this year.
Amazon.com Inc. and Cisco Systems Inc. surprised Wall Street with
bigger-than-expected profit in the fourth quarter, as a number of
other sectors of the stock market struggled.
Robust earnings and upbeat profit forecasts for many technology
companies this year have pushed the Nasdaq ahead, in percentage
terms, of the S&P 500 and Dow, which have been weighed down by
concerns about global economic growth, falling profits at energy
companies and banks still struggling to pay big legal bills that
are a legacy of the financial crisis.
So far this year, the Nasdaq has gained 5.7%, compared with a
2.8% rise in the S&P and a 2.6% climb in the Dow.
The Nasdaq's gains reflect the shifting character of an
increasingly diverse group of global companies. The Nasdaq now is
about 40% technology companies, down from two-thirds in 2000. About
a fifth of Nasdaq companies deal in consumer goods and a sixth in
health care.
At the same time, this year has offered investors some unhappy
reminders of the toll that time has taken on even some successful
veterans of the first Nasdaq run to 5000.
Microsoft, the most-valuable company on the Nasdaq in March 2000
and the second-biggest after Apple now, is up 14.5% over the past
year. But the Redmond, Wash., software maker's market value has
shrunk to $360 billion now from $525 billion then.
Similarly, Cisco has shrunk to $151 billion from $466 billion
and Intel Corp. to $157 billion from $401 billion, according to
FactSet and Nasdaq data. Investors in all the firms have done
better than the market cap figures would imply because of the
dividends the firms have paid.
Elsewhere in the stock market on Monday, a 2.6% gain in Visa
Inc. contributed 45 points to the Dow's gains. Costco Wholesale
Corp. named Citigroup Inc. and Visa Inc. as its new credit
partners. Citi shares gained 2%, while Costco gained 0.7%.
Cardinal Health Inc. agreed to acquire Johnson & Johnson's
heart-product business for $1.94 billion in cash. Cardinal shares
rose 1.7%, while those of J&J gained 0.7%.
Later this week, investors will be closely eyeing Friday's jobs
report for February. Economists polled by The Wall Street Journal
expect employers to have created 230,000 jobs last month. The
unemployment rate is seen 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%.
Crude-oil futures fell 0.3% to $49.59 a barrel. Gold futures
declined 0.4% to $1207.70 an ounce.
The yield on the 10-year Treasury note rose to 2.083% as prices
fell.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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