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Wall Street History
https://www.gofundme.com/s3h2w8
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03/04/2005
Nasdaq 5000, Part II
I had the foresight to save some newspapers and journals from
the bubble era so this week I thought I’d take a further look at the
background behind the Nasdaq’s surge to 5048 on March 10,
2000. First some numbers.
12/31/99
Nasdaq 4069 +86% in ‘99
Dow Jones 11497
S&P 500 1469
Russell 2000 504
S&P P/E 33.42 (trailing 12 months)
3/31/00
Nasdaq 4572
Dow Jones 10921
S&P 500 1498
Russell 2000 539
S&P P/E 31.05 (trailing 12 months)
Nasdaq was up a staggering 49% from 10/15/99-12/31/99. [By
comparison, the S&P 500 surged 18% over the same period,
certainly not too shabby either.]
Christmas week, 1999, saw shares in Qualcomm soar $59 to
$176 after a PaineWebber analyst issued a report with a target
price of $250 (split adjusted).
For 1999, the S&P tech sector was up 75%, following 1998’s
72% advance. Technology, a whopping 30% of the S&P at year
end ’99, was responsible for 90% of the overall S&P 500 gain
that year of 21% (total return).
[Source: Barron’s 1/3/00]
Here’s another good overview, including the sentiment from that
era; excerpts from E.S. Browning’s column in the Wall Street
Journal, 1/3/00.
“To fans, the tech-stock gains were yet more evidence of a new
era of technological innovation that is rewriting the rules of both
the economy and the stock market. To the biggest tech bulls, the
new era is symbolized by the Internet and is still in its infancy.
To skeptics, the remarkable gains are another frightening
indication the great bull market of the 1990s has turned into a
mania and could end badly.
“Whoever is right, even bullish prognosticators are warning
clients to expect the unexpected.
“ ‘Simply put, our forecast for 2000 is that the unprecedented
continues to happen,’ says Lehman Brothers investment
strategist Jeffrey Applegate, lately one of the more successful
market forecasters, in a report to clients. Even the bullish Mr.
Applegate, who forecasts a strong year to come, underestimated
the market’s strength when he made his forecast a year ago.
“Whether it was a mania or a new era, the technology bonanza of
1999 was a narrow phenomenon. With investment money
flooding madly into technology, nontechnology stocks suffered,
some mightily. Many actually showed declines for the year.
While communications-equipment maker Qualcomm leapt more
than 2,000%, established, blue-chip names such as soft-drink
titan Coca-Cola and drug giant Merck declined in value.
“Indeed, with the Federal Reserve steadily raising interest rates
from June 30 onward, and threatening to continue this year, most
stocks declined from summer onward. But tech-stock investors
laughed in the face of Fed Chairman Alan Greenspan. Tech
lovers are betting the world’s recovering economies will load up
on so many high-tech and communications toys that even high
interest rates won’t hold back tech earnings.
“The revolution in information technology is changing the world
in ways similar to what railroads and steel did in the past, says J.
Thomas Madden, chief investment officer at Federated Investors
in Pittsburgh. Citing business uses of the Internet, as well as
heavy investment in new technologies, he says: ‘I think we are
undergoing a powerful shift in the way the world does business.’
Despite technology stocks’ huge gains last year, he believes
investors should keep a strong dose of technology in their
portfolios .
“Bears are pointing with increasing frequency to Japan’s
experience in the 1980s. The Japanese market, they note, belied
critics for so long that many finally concluded that Japan’s
economy was in a new era that justified unprecedented stock
gains. It was when the doubters were fully discredited that the
Japanese market finally crumbled .
“Bearish Barton Biggs of Morgan Stanley Dean Witter points out
that technology and telecommunications stocks have come to
dominate stock markets around the world. ‘From these
disproportionate weights, I conclude that when the tech and
telecom bubbles burst, all the world’s markets will come down
together,’ he writes.
“But he adds, ‘Although there are many signs that the craziness
is at manic proportions, I don’t see the event yet that is going to
crack it.’ He quotes a Japanese stock market saying: ‘Only fools
are dancing, but the bigger fools are watching.’”
---
Finally, I thought you’d like to see some representative share
prices, including both hot Nasdaq issues of the era as well as
more standard NYSE fare.
I am including two periods of time. The first set of numbers
represents the 52-week range and 12/31/99 close. The second set
represents the 52-week range and 3/31/00 close. ‘s’ denotes a
stock split in the prior 52 weeks. ‘n’ is a new issue within the
past 52 weeks.
Don’t get confused with the splits. Remember, some stocks split
2, 3, or 4 to 1 and then immediately soared right back to the old
level rationality be damned. Others would split after the period
I’m covering, thus don’t get hung up on the numbers vs. what
you perceive to be the all-time marks. For example, Cisco’s all-
time high is $82, set on 3/27/00. [Adjusted for splits.] But Intel
didn’t hit its high until 8/28/00, $76, again, you’ll see this was
split-adjusted.
12/31/99 ..3/31/00
Amazon (112-41)s 76 ..(112-41)s 67
AOL (95-32)s 76 ..(95-38) 67
Ariba (211-30)n 177 ..(366-30)s/n 209
Broadcom (289-46)s 272 ..(253-29)s 242
Citigroup (58-32)s 56 ..(62-40)s 59
Cisco (107-44)s 107 ..(82-24)s 77
CMGI (288-26)s 277 ..(163-33)s 113
Commerce One (331-8)s/n 196 ..(331-8)s/n 149
Doubleclick (255-22)s 253 ..(135-30) 93
eBay (234-55)s 125 ..(255-70) 176
EMC (111-41)s 109 ..(145-46)s 125
eToys (86-24)n 26 ..(86-8) 8
Exxon Mobil (87-64) 81 (87-69) 77
General Electric (159-94) 155 ..(164-99) 155
Global Crossing (64-18)s 50 ..(64-20) 40
Intel (89-50)s 82 ..(145-50)s 131
JDS Uniphase (177-14) 161 ..(153-12)s 120
Juniper Networks (384-90)n 340 ..(312-30)s 263
Lucent (84-47)s 75 ..(84-49)s 60
MCI Worldcom (64-44)s 53 ..(64-40)s 45
Merck (87-60)s 67 ..(85-52) 62
Microsoft (119-68)s 117 ..(119-75) 106
Motorola (149-60) 147 ..(184-73) 142
Nortel (110-24)s 101 ..(144-31)s 125
Oracle (113-21)s 112 ..(90-10) 78
Pfizer (50-31)s 32 ..(50-30)s 36
Qualcomm (185-6) 176 ..(200-15)s 149
Sun Micro (83-21)s 77 ..(106-24)s 93
Wal-Mart (70-38)s 69 ..(70-38)s 55
Yahoo (448-110)s 432 ..(250-55)s 171
Notes:
--You may see a ‘s’ for a split during one period and not another,
as in the case of AOL. That’s because it was more than 52
weeks since the split, thus no ‘s’ on the second series.
--Commerce One was as wild as they came. The week of
12/27/99, the stock rose $53 following a stock split. Then the
week of 3/27/00, it fell $74 over the course of the five days. It
was like that almost every week it seemed.
--The action in eBay the week of 3/27/00 was also symptomatic
of the times. The stock hit the $255 level you see above during
the week, yet finished up at $176.
--eToys was an example of a stock that soared on the IPO, only
to crash and burn in fairly short order. Yes, the 3/31/00, 52-week
range and 3/31 price are correct.
--Yahoo’s 52-week range for 3/31/00 is adjusted for the fact the
shares were at $500 at one point before a split.
--And remember, some of these shares may have split at least
one time after the periods I’m highlighting, as in the case of G.E.
Source: For all the above data, Barron’s 1/3/00 and 4/3/00.
Wall Street History returns March 11.
Brian Trumbore
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