Nasdaq hits 5 000 points after 15 years

Published Mar 3, 2015

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Lu Wang and Michelle F Davis New York

THE NASDAQ Composite index jumped above 5 000 for the first time in 15 years, extending a rally founded on profits that have risen nearly 200 percent in six years.

Pushing higher for a fifth week, the gauge climbed 0.7 percent to 5 000.33 points as of 10.30am in New York, surpassing a level it has exceeded on only seven other days, all of them in March 2000. Nine consecutive quarters of gains led by a 70 percent surge in Apple have lifted the index within 1 percent of its all-time high of 5 048.62.

Momentum is building in stocks that have the fastest profit growth, with companies from Apple to Intel spending more money than anybody else to buy back shares. While the advance has brought the Nasdaq close to new highs, valuations are only a fraction of where they were 15 years ago.

“The difference between Nasdaq today and Nasdaq 15 years ago is many of the strongest companies in Nasdaq have had good earnings and are not at stretched valuations,” said Michael Strauss, the chief investment strategist at Commonfund Group.

Unlike the dot-com era, when investors snapped up internet companies with promise but little profit, today’s gains are built on earnings driven by demand for products such as Apple’s iPhone and Google’s web-search services.

Information technology, the biggest industry in the S&P 500 with a 20 percent weighting, accounted for 19.3 percent of the full index’s operating earnings last year, data compiled by S&P Dow Jones indices show. In 2000, when technology stocks commanded nearly a third of the gauge, the group’s profits were 12.8 percent of the total.

While the stretch of rallies is unprecedented, the pace of gains is not close to the dot-com era. Over the two years leading up to the 2000 peak, the Nasdaq Composite surged 189 percent and nearly 50 stocks soared at least tenfold.

Since the start of 2013, the index has risen 65 percent, and no stock is up more than tenfold. – Bloomberg

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