Forget Dow 17,000 and bring on Nasdaq 5,048
The market is closing in on some other important milestones. Here's what to know about the history-making numbers.
In some ways what's notable about the Dow reaching 17,000 isn't that it’s gained a such a lofty height, but that it could be stalled here for some time.
The Dow closed above 14,000 in February 2013, and hit 14,253 a few weeks later in March. While not a round number, the latter milestone was important because it represented a new all time high. The previous one, hit in October 2007, had stood as a reminder of the myopia on the eve of the financial crisis.
In any case, since then, milestones have tumbled quickly. The index hit 15,000 by May 2013 and 16,000 by November. After such a rapid run up, the Dow took almost eight months to reach the next round-number close, 17,000 on July 3, where it's now again hovering.
Given that some of our brightest minds are puzzling over why stocks have come thus far, and whether their current prices relative to earnings are justified, perhaps we’ll see 16,000 again before we see 18,000.
S&P 500 2,000
When the Dow hit 17,000 earlier this year, it seemed like the Standard & Poor's 500 Index ($INX) would follow with a milestone of its own, hitting 2,000 for the first time.
As it turned out, the S&P topped out at 1,987 on July 23. In some ways, the S&P’s triple-zero achievement would be more historic. After all, the S&P will have doubled to get to 2,000 from 1,000, which it first hit in February 1998. The Dow's latest milestone represents a gain of only about 6 percent.
And of course the S&P is a better stock market gauge than the Dow. The Dow, founded in 1896, represents just 30 of the nation’s largest companies. The S&P, which has existed in its current form since the '50s, covers 500. It also weights companies based on their relative values, as opposed to the Dow, which relies on stock prices -- an arbitrary distinction that happened to be convenient for nineteenth-century stock nerds.
More important, people actually own the S&P 500, in the form index mutual funds and ETFs which track the index. So why do we still pay attention to the Dow? Just because we always have. When you're talking about milestones, history counts…
Nasdaq Composite 5,048
The tech-heavy Nasdaq Composite Index ($COMPX) recently closed at 4,500. If there's one milestone worth caring about, it could be when (if?!) this index reaches 5,000, or more precisely 5,048.62.
That was its all-time high, hit in March 2000. From there the Nasdaq fell steeply -- declining to just above 1,100 in 2002. So it’s been a pretty steep march back, for which you can thank juggernauts like Google (GOOG), which has returned more than 1,000 percent since its August 2004 initial public offering and Apple (AAPL), which has returned 4,500 percent over the same span.
Of course, there are those who think we may be in the early stages of another tech bubble -- even Fed chair Janet Yellen has raised an eyebrow over pricey social networking and biotech stocks. That said, those of us who can remember the euphoria of 1999 probably feel like investors are a little more wise this time around.
Let's hope so. The track record of more recent IPOs like coupon company Groupon (GRPN) and game producer Zynga (ZNGA), both trading at less than a third of their initial prices, suggest that investors can still muster some skepticism.
Earlier this week, Apple earned a wave of headlines when its shares hit $100, a record high, amid strong expectations for products like a larger iPhone and a possible smart watch. That's good news for CEO Tim Cook, who must try to fill the shoes of legendary founder Steve Jobs.
And Wall Street analysts seem to think it can climb higher, predicting it will reach $105 over next 18 months, although they are a famously bullish crowd.
One thing is for certain, as far as milestones go, this one’s pretty flimsy. While $100 has a nice ring to it, Apple’s shares would be worth about $700 if the company hadn’t undergone a 7-for-1 stock split in June.
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"Of course, there are those who think we may be in the early stages of another tech bubble"
No, we are in the later stages of a massive Stock and Debt Bubble. The only reason it has yet to burst, the Central Banks printing to Infinity and Beyond.
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