After 15 years of going slow, the NASDAQ Composite climbed to close at 5000, mimicking its performance of March 27, 2000. You know what they say about slow and steady…
It was in March 2000 that the NASDAQ Composite caused such a furor. First, on March 10, 2000, the NASDAQ touched its all-time closing high of 5048.62, and then, 17 days later, on March 27, 2000, the Composite tracking the prices of 2,571 companies on the NASDAQ Stock market, closed at the 5000 mark, climbing up by a staggering 111% from just a year before. But this buoyant performance lasted all of two days. Investors lost faith in the Internet companies with values based on clicks rather than profits, their projected earnings tanked and the tech-fueled index dropped by over 80% to close at the bottom in October 2002.
On March 2, 2015, Monday morning at 10:30 AM ET, the NASDAQ Composite traded up at 5000 before shrinking back, climbing into the 1% realm of its record closing high.
March of the market
Has the index revived its flagging reputation of tracking the players of a forgotten dot-com bubble, by reflecting a wider portfolio of global players in the consumer products, healthcare, technology and finance industries? Could NASDAQ 6000 be in the near future?
It is impossible to tell, say market analysts. Though "tech stocks have room to run," Ari Wald, technical analyst with Oppenheimer told USA Today.
Considering that this recent good swell was brought about by a 14% upswing in the shares of NXP Semiconductors NV (NASDAQ: NXPI), following news of a merger with Freescale Semiconductor Ltd. (NYSE: FSL) to create a $40 billion company, it would be fair to say that the NASDAQ enthusiasm is here to stay.
Today, NASDAQ is backed by tech companies that are keen on valuations and raise their portfolio through fundamentals, as opposed to the good old days. Apple (NASDAQ: AAPL), Google (NASAQ:GOOG), Microsoft (NASDAQ: MSFT) and Facebook (NASDAQ: FB) lead the way, followed by profitable non-tech companies such as electric car manufacturers Tesla (NASDAQ: TSLA), coffee chain Starbucks (NASDAQ: SBUX) and biotech bigwig Gilead Sciences (NASDAQ: GILD), to name a few.
Good going
The growth in the tech-fired index has been brought about through carefully planned earnings growth and dividend payouts by the companies listed. Its quantum strides ahead are undeniable and offload less risk on the shareholders. The index slithered back to power by relying on reasonably valued stocks of profit making companies. Gone are the days of fly-by-night Internet companies and flimsy dreams of overnight success. Leading financial markets magazine Barron’s surmised that NASDAQ’s victory lap was in part due to the index trading expensively, back in the day, at 100x earnings; contrasted with, price-to-earnings ratio of 21 today. While the companies driving NASDAQ growth are more mature and diverse, investors have also learned their lessons of not being blindly infatuated with tech stocks.
And nothing leads market growth like profit – in the third quarter of 2014, Apple made $75 billion while biotech pharma company Amgen (NASDAQ: AMGN) made $5.3 billion.
Monday’s peak came after a 10-day winning streak that was cut short last week. This 10-day streak is the longest profitable period of the index since July 2009. The market index climbed by 7% in February and ushered March in on Wall Street, with quite the bang. The broader market was also surging – with Dow Jones Industrial Average playing up by 103 points, closing at 18, 236 and Standard and Poors climbing up by 5.5%. This might have eclipsed the NASDAQ Composite’s home run swing, but it does not look like it can be ignored much longer.
