The technology-heavy Nasdaq composite index closed above 6,000 for the first time Tuesday as part of a broad rally in stocks being driven by a bullish outlook for U.S. corporate growth.
The Nasdaq index crossed the milestone 17 years after it first reached 5,000 during the height of the dot-com era, a market bubble that would burst when the stratospheric valuations of many young Internet companies proved unsupportable.
Leading the Nasdaq now are stocks of giant Silicon Valley tech companies such as Apple Inc., Facebook Inc. and Google parent Alphabet Inc., which are on much firmer ground.
One measure of tech-stock valuations is the Nasdaq’s ratio of stock prices to company earnings. At the end of March the P/E ratio for the index was 31.5, according to FactSet Research Systems Inc., less than a third of its dot-com peak.
And the sector is leading the market’s latest charge after financial, industrial and materials stocks led the market to record highs earlier this year after Donald Trump’s election as president.
The Nasdaq index so far this year has surged nearly 12%, outperforming the 6.2% gain of the blue-chip Dow Jones industrial average and the 6.7% advance of the broader Standard & Poor’s 500 composite index.
But those latter two gauges are close to setting fresh record highs as well, as Wall Street extends a bull rally that’s now in its ninth year.
The Dow jumped 232.23 points, or 1.1%, to 20,996.12 on Tuesday – the average’s record high was 21,115.55 set March 1 – and it’s surged 448 points, or 2%, in the just the last two days. The S&P 500 rose 14.46 points, or 0.6%, to 2,388.61; its record high of 2,395.96 also was set March 1.
Two Dow components, McDonald’s Corp. and Caterpillar Inc., were among the companies posting strong quarterly results Tuesday that exceeded expectations. McDonald’s shares jumped $7.47, or 5.6%, to $141.70, and Caterpillar surged $7.61, or nearly 8%, to $104.42.
Apple, Facebook, Alphabet and Microsoft Corp. are among the tech stocks showing strong performances. Because the Nasdaq index is weighted by its member stocks’ market values, those bigger companies have a greater effect on the index’s movement, said Ivan Feinseth, chief investment officer and research director at investment bank Tigress Financial Partners.
Since the election, there has been a high level of enthusiasm in the economy, with big improvements in consumer sentiment and consumer confidence, Feinseth said. That’s led to high expectations for increasing capital expenditures for tech products and services, especially in firms’ IT infrastructure and cybersecurity.
“Expectations for tech spending are very high, consumer confidence is much higher, and this is driving positive gains in the stock market,” Feinseth said. “I think we’re in a very strong bull market. I think it has a ways to go.”
Apple’s stock, for instance, has soared nearly 25% this year amid expectations of stronger earnings. Apple, which gained 89 cents, or 0.6%, to $144.53 a share Tuesday, next week is expected to report fiscal second-quarter profit of $2.02 a share, up from $1.90 a year earlier, according to analysts polled by FactSet.
Investors also bid up Alphabet, Amazon.com Inc. and Intel Corp. in anticipation of their scheduled quarterly earnings reports Thursday.
Stocks overall initially rallied in the months after Trump’s election in response to his proposed pro-business agenda of lower tax rates, less regulation and higher infrastructure spending. Trump is expected to unveil details of his tax plan Wednesday.
Tech stocks lagged behind in that rally amid concerns that the Trump administration’s efforts also might lead to protectionist policies or tariffs on goods coming from overseas, said Ryan Detrick, senior market strategist at LPL Financial. Those concerns ended up being largely overblown, he said.
“The big technology names have been just growing almost exponentially, and they’re really almost pulling the entire technology group with them,” he said.
In addition to sustained earnings strength, the stock market overall has avoided major shocks from overseas of late. Instead, stocks rallied after centrist candidate Emmanuel Macron won the first round of France’s presidential election, reducing concerns that the nation might pull out of the euro currency.
“The French election is (largely) off the table as a systemic risk,” Brad McMillan, chief investment officer of Commonwealth Financial Network, said in a research note.
The euro rose to $1.0939 from $1.058 late Monday, and global stock markets also advanced. In the commodities markets, benchmark U.S. crude oil rose 33 cents to $49.56 a barrel.
In the credit markets, interest rates continued to climb, with the yield on the 10-year Treasury note rising to 2.33% from 2.27% late Monday and 2.17% a week ago.
4:05 p.m.: This article is updated throughout with reporting by staff writers and includes analysts’ comments on the jump in technology shares.
1:40 p.m.: This article was updated after the close of markets.
8:25 a.m.: This article was updated with more recent market information.
This article was originally published at 7:40 a.m.