The Nasdaq composite stock index, the new emblem of the nation's love affair with technology, soared Thursday to close above 5,000 for the first time.
The milestone, crossed just four months after the market barometer topped 3,000, reflects one of the most stunning run-ups in Wall Street history, and is an exclamation point for the growing split between stocks of the "new economy" and those of the "old economy."
Behind that split are individual investors such as Mark Mobley.
The Denver sports psychology consultant has two-thirds of his savings in technology stocks, ranging from well-known Lucent Technologies to an obscure wireless-data start-up named Telenetics.
"What's going to happen three years down the road [with technology] is incredible," he marveled. And "in 20 or 50 years, the world is going to be turned upside-down" by technology.
That kind of enthusiasm, multiplied millions of times over, has driven up the Nasdaq share index 110% over the last 12 months and lifted it 149.60 points, or 3.1%, to 5,046.86 on Thursday. This year alone the index has jumped 24%.
Dominated by hundreds of the nation's fastest-growing, cutting-edge technology, telecom and biotech companies, the 4,600-stock Nasdaq index now is the most widely quoted stock barometer of the so-called new economy. For many investors, this 29-year-old stock index has already far eclipsed the century-old Dow Jones industrial average as a market measure.
Indeed, in recent months, the intensity of investor demand for "new-economy" stocks has stunned Wall Street--as has the ferocity of the dumping of "old-economy" stocks such as many of those in the Dow index.
Despite a 154.20-point gain Thursday to 10,010.73, the blue-chip Dow is down 13% for the year.
"I'd be surprised if it takes too long before the Nasdaq catches up to the Dow [in point terms] because of the underlying growth rates of the companies in the indexes," says Thomas McManus, market strategist at Banc of America Securities in New York.
Signs of rampant bullishness over tech are everywhere.
Six months ago, about 1 billion shares a day were traded on Nasdaq. In four of seven trading days this month, investors have pushed daily activity to more than 2 billion shares.
Mutual funds that focus specifically on tech stocks had $32 billion in assets at year-end 1998. Those assets now top $125 billion.
As once little-known technology stocks such as wireless firm Qualcomm, semiconductor maker PMC-Sierra and fiber-optics firm JDS Uniphase carry Nasdaq ever higher, many veteran Wall Street pros fear that craving for these stocks has become a full-fledged mania that is bound to end the way other frenzies have ended--with a calamitous crash.
Tech stocks' prices relative to underlying earnings are in the stratosphere--and that is for companies that have any earnings at all.
Bearish analysts say the tech-stock boom is now little more than a frantic pile-on of investors buying not because they trust in technology, but because they fear being left behind.
Mutual funds, for example, face unprecedented pressure to keep up with their tech-laden competitors, or face heavy redemptions from impatient shareholders.
Outside of tech, the majority of U.S. stocks already may be mired in a bear market, some say. Over the last year, almost four-fifths of the stocks in the blue-chip Standard & Poor's 500 index have fallen 20% or more, the traditional definition of a bear market, according to Morgan Stanley Dean Witter.
"Suppose you're a new investor," said James Stack, an investment newsletter writer who believes the market is teetering on the brink of disaster. "You've seen nothing but [a] bull market and view Wall Street as a fattened cash cow. . . . Where are you going to put [your money]" but in the hottest stocks of the moment, which are tech issues.
But hordes of investors--not only individuals but also a growing number of professionals--aren't fazed by the warnings. The Nasdaq bull market's believers insist that the demand for tech stocks is rooted in the notion that change is constant, and that technology use has reached such a critical mass worldwide that it will give rise to unimagined industries.
No one suggests that there won't be sharp and volatile pullbacks in the Nasdaq index. Indeed, by the traditional standard that considers a 10% drop a "correction," Nasdaq underwent two of those in January.
But the reality of investing today is that the public--now a user of much of the technology developed over the last decade--also wants to own what's new and hot in tech ideas, analysts say. And those ideas inevitably list on Nasdaq, instead of the New York Stock Exchange, and quickly get their shot at stardom.
"The synergistic mix of all technology [breakthroughs] of the past two decades is coming now, and some of the best new products are ahead of us," said Peter Canelo, an investment strategist at Morgan Stanley Dean Witter in New York.