Tech Stocks Power Nasdaq Past the 3,000 Mark

The 1990s bull market notched another major milestone Wednesday, as the Nasdaq composite index closed above the 3,000 mark for the first time.

Though the event lacked the air of drama that surrounded the Dow Jones industrial average’s rise above 10,000 last spring, it speaks volumes about the dominance of technology stocks as the premier equity investments of the 1990s.

The Nasdaq index, which includes many of the nation’s leading tech issues, rose 46.88 points, or 1.6%, to end at 3,028.51 on Wednesday, pacing a broad market rally.

Winners topped losers by 23 to 16 on Nasdaq and by 17 to 14 on the New York Stock Exchange in continued heavy trading.

The Nasdaq index, created in 1971 with a value of 100, now has multiplied 29-fold since then.

By contrast, the Dow Jones industrial average, which added 27.22 points to 10,609.06 on Wednesday, has risen 11-fold in that same period.

But it has only been in this decade that Nasdaq has come into its own--as an index and as a marketplace--as investors’ love affair with technology stocks has reached epic proportions.

The index has surged 200% just since mid-1995, when it crossed 1,000 for the first time. In that same period, the Dow has risen 124%.

So far this year, Nasdaq is up 38.1% versus the Dow’s 15.6% gain.

In 1998, the Nasdaq market surged 39.6%, fueled by major tech shares such as Microsoft and Intel and by the mania for the army of fledgling Internet companies--virtually all of which list on the Nasdaq market.

Internet directory Yahoo, for example--now the 12th-largest stock in the Nasdaq index--zoomed 585% last year.

Although the index measures the aggregate price moves of 4,845 Nasdaq stocks, it is a capitalization-weighted index--meaning it is most affected by the moves of its largest stocks in terms of stock market value. And those, of course, are nearly all technology issues, even though Nasdaq also is home to companies in virtually every other industry.

“All you’ve got to do is keep those big tech stocks moving, and the Nasdaq’s going to keep going up,” Gil Knight, a money manager who helps oversee $11 billion at Allied Investment Advisors, noted to Bloomberg News.

“If their [tech companies’] earnings continue to do well, I think we’ll see Nasdaq at 4,000. I’d give it another year.”

Nasdaq, the archrival of the New York Stock Exchange, now can boast that the most valuable company on the planet--Microsoft--is a Nasdaq company, not a Big Board listing. Microsoft’s shares are valued at $473 billion.

When the electronic Nasdaq market was created three decades ago it would have been hard for anyone involved to imagine ever making that kind of claim. Nasdaq was originally home mostly to smaller companies that couldn’t meet the NYSE’s requirements.

But as the technology industry has mushroomed, what were once small Nasdaq companies have become global titans.

Of course, some Wall Street pros argue that the Nasdaq index, and many of its key tech stocks, now are severely overvalued--and at high risk of a huge decline if interest rates continue rising or if the economy should stumble into recession.

But for now, with rate fears receding and the economy still apparently in good health overall, most investors in technology stocks are focusing on what still appear to be strong growth prospects for the sector.

On Wednesday bond yields closed mostly unchanged as fresh economic data suggested at least some slowdown in activity. The 30-year Treasury bond ended at 6.13%, down from 6.14% on Tuesday.

Helping bonds, the Treasury said it will sell $15 billion of five-year notes and $10 billion of 10-year notes at auctions next Tuesday and Wednesday, less than the total $27 billion expected by analysts.

The quarterly sales won’t include 30-year bonds for the first time since 1995, reflecting budget surpluses that have reduced government borrowing needs.

Among Wednesday’s highlights:

* Tech stocks leading Nasdaq higher included Sun Microsystems, up $2.88 to $106.56; Emulex, up $15.81 to $160; and Broadcom, up $8.50 to $150.13.

Also, Oracle leaped $4.25 to $57.31 after announcing it formed a venture with Ford to link the auto maker’s entire supply chain of 30,000 businesses over the Internet.

* Telecom shares up sharply included Qualcomm, up $35.69 to $260.50, and JDS Uniphase, up $20.44 to $191.44.

* Bank stocks pulled back. J.P. Morgan lost $2.81 to $129.13, and Citigroup fell 69 cents to $53.

Market Roundup, C11

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Another Wall St. Milestone

The Nasdaq Stock Market’s main index closed above 3,000 on Wednesday, surging 46.88 points, or 1.6%, to a record 3,028.51. Since its creation on Feb. 5, 1971, at a value of 100 the index has far outpaced the gains of blue-chip stock indexes, thanks to Nasdaq’s position as the premier market for major technology stocks.

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Source: Bloomberg News