Market watchers who focused on the S&P 500 reaching a new intraday record on Friday, or on the Dow Jones Industrial Average climbing back above the 18,000 mark, may have missed a more exciting milestone.
After all, the Standard & Poor’s index hit new record highs almost every other week late last year, and the Dow first surpassed 18,000 last year. Old news. The real excitement in the market this week was the climb in the Nasdaq, which gained 165 points, or 3.5 percent. On Friday alone it added 36 points to reach 4,894. That’s only 106 points away from 5,000. From there, it’s in spitting distance of its all-time closing high of 5,048.62 on March 10, 2000. That’s right, it took 15 years, but the Nasdaq could soon exceed the peak from its tech-bubble glory days. In contrast, the S&P 500 is now 40 percent above its early 2000 high.
Of course, if you adjust for inflation, the Nasdaq would have to get a lot higher — 6,941 to be exact — for investors who held stocks in the index to be made whole in real dollars. The S&P is only just above its inflation-adjusted high from 15 years ago of 2,059.
Thursday was a big day for the Nasdaq, which got a 1.2 percent lift to 4,858, its highest level in 15 years. Cisco (Nasdaq: CSCO), one of the original Internet “horsemen,” was a big part of that gain, climbing 9.4 percent after exceeding earnings estimates.
A deal between online travel companies Expedia (Nasdaq: EXPE) and Orbitz Worldwide (NYSE: OWW) also created more enthusiasm for Nasdaq stocks. TripAdvisor (Nasdaq: TRIP) jumped 25 percent on hopes for more deal-making in the travel sector.
The tech sector lagged the S&P at the start of the year. But it’s not just Cisco — several tech bellwethers have posted surprisingly strong fourth-quarter results, including Intel (Nasdaq: INTC) and Apple (Nasdaq: AAPL).
Strong sales and profits from the tech giants have reminded investors that, even without global economic growth, tech stocks can outperform as long as they are in the sweet spot of secular trends like growth in mobile, cloud computing or the networked home.
“We believe the pace of innovation is accelerating and providing attractive growth opportunities for many technology stocks even in a mixed global macro environment,” analyst Steve Jue with Rainier Investment Management wrote recently in his 2015 outlook, explaining why the firm is emphasizing technology stocks.
The Nasdaq may not make it to 5,048, let alone 6,841. But if global tensions continue to ease and economic trends provide a tailwind, this era’s four Internet horsemen – oddly reminiscent of the four horsemen of the late ‘90s, could ride to new record highs once again.
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