First came the Dow. Then the S&P; 500. And now the Nasdaq is reaching a milestone.
The technology-laden Nasdaq composite index briefly jumped above 4,000 on Monday, the first time it has hit that mark since the collapse of the dot-com bubble 13 years ago.
The once-obscure index initially crossed that level for the first time at the end of 1999. It became a symbol of the tech boom that some thought would parallel the Industrial Revolution.
Instead, the Nasdaq tumbled below 4,000 four months later as investors' infatuation with unprofitable companies such as Pets.com and EToys burned itself out. The index remains far below its all-time close of 5,048.62 in March 2000.
It is one of the few major market indexes not at or near an all-time high.
"This shows how much of a bubble we really had back in 2000," said Jack Ablin, chief investment officer of BMO Private Bank in Chicago. "It's taken 13 years and we're not even there yet. It's the equivalent of the stock market crash of 1929."
Still, the Nasdaq is one of the market's best-performing indexes this year, up more than 32% since Jan. 1. It edged up 2.92 points Monday to close at 3,994.57.
The Dow Jones industrial average, which pierced 16,000 for the first time last week, rose 7.77 points to 16,072.54. The broader Standard & Poor's 500 index, which closed above 1,800 for the first time Friday, finished down 2.28 points at 1,802.48.
Tech stocks have been propelled by the same forces driving the rest of the market: slow but steady economic growth, the Federal Reserve's easy-money policies and a paucity of investment alternatives.
The Nasdaq also has benefited from investors' renewed interest in tech stocks. Apple Inc. is far below its peak of a year ago, but Google Inc. and Amazon.com Inc. have been unstoppable lately.
Recapturing 4,000 also underscores the differences in the Nasdaq from 13 years ago.
Tech remains the biggest part of the index at 45%, according to Ned Davis Research Group. But that's down from 59% at the end of 1999.
The consumer discretionary sector has nearly doubled to 19.2% from 9.7%, while healthcare has expanded to 14.7% from 10.1%.
And the index appears to be sturdier now, with more durable earnings and fewer unprofitable companies.
The cumulative annual earnings of the index's 10 largest companies is now $107.6 billion, up from $26.4 billion in 1999, according to Ned Davis.
"It is a stronger Nasdaq today," said Amy Lubas, technology and industrials strategist at Ned Davis, who compiled the Nasdaq data.
Valuations have risen recently but are far below dot-com levels. The price-earnings ratio, a measure of the cost of a stock compared to underlying profit, is roughly 21 now, according to Ned Davis. It peaked at 49 at the end of 1999.
"There is not the same prevalence of companies with no earnings or no prospect of earnings that littered the landscape in the late 1990s," said Dan Greenhaus, chief global strategist at BTIG in New York.
In some ways, analysts said, the recovery in the Nasdaq represents an evolution in the way that investors and consumers view technology. Amazon.com and Priceline.com Inc. once were thought of as tech companies. They're now seen as consumer firms.
"At the last peak, investors were obsessed with the Internet," Ablin said. "And what we've realized is that the Internet was an avenue to do business, not the business itself."
Four of the Nasdaq's top 10 companies, as measured by market capitalization, are the same today as 13 years ago. They are Microsoft Corp., Cisco Systems Inc., Intel Corp. and Qualcomm Inc.
But Dell Inc., Yahoo Inc. and Oracle Corp. have been pushed aside by Apple, Google and Amazon.com.
Though they still have large profits, several darlings from the dot-com era have never regained their luster. Intel reached nearly $75 in mid-2000. Cisco hit $80 in March 2000. Both trade at around $24 today.
Wall Street has worried lately that the rise in the stock market may have gone too far and that a correction may hit early in 2014.
But while bulls say that's possible, they point to the modest valuations compared with the dot-com era as evidence that the market is fundamentally strong long-term.
"It's still pretty early on in the bull market," said Ed Peters at First Quadrant in Pasadena. "This is a young rally."