The tech-dominated Nasdaq composite index closed above 4,000 today, capping an astounding year in which it gained a record-breaking 84 percent.
Today's darling was Qualcomm, a wireless company whose shares surged another 25 percent, extending a rally that has pushed the shares up 2,300 percent so far this year.
In relatively light trading, the Nasdaq composite gained 69.35 to close
at 4,041.46. It has set 60 records this year. The 84 percent gain for the year nearly matches the performance of the Dow
Jones industrial average in 1915.
The Nasdaq's performance this year far outstrips the Dow and Standard & Poor's 500 index, which have gained 25 percent and 19 percent, respectively.
The Dow closed at 11,484.6 today, up 7.89; the S&P 500 finished at 1,463.46, up 5.8; and the CNET tech index gained 44.59 to close at 2,922.61.
The Nasdaq has a market value of more than $5.1 trillion, of which tech companies alone account for more than half, with a combined value of $2.7 trillion.
"It was an unprecedented year for the Nasdaq. ...This is only the second time it's gained in excess of 40 percent year-over-year. The second-best gain was 56.8 percent in 1991," said Walter Murphy, senior international market analyst with Merrill Lynch.
Meanwhile, the pace of the rise in the index has accelerated since it was
created in 1971, when it began trading with a value of 100. It took 24 years to pass the 1,000 mark, when it closed at 1,005.89 in July 1995.
Another three years passed before it reached 2,000, in July 1998. But in 1999 alone, the Nasdaq has hit two major records: the 3,000 mark last month and its latest milestone today.
"What happened to the Nasdaq was like the storm of the century," Murphy said.
He added, however, that the pace will be difficult to maintain, and that investors should not expect to cross the 5,000-point milestone next month.
"It's highly unlikely it will hit 5,000 next month, but it may be possible
in the first half of the year," he said.
Investors also will likely see a return of more normal year-over-year
growth of about 20 percent, Murphy predicted. Since the Nasdaq's
inception, the average annual growth has been 15 percent.
During the year, the Nasdaq added 500 companies, bringing its roster to 4,844 companies, said Wayne Lee, a Nasdaq spokesman.
"This performance is indicative that the Nasdaq market has been the home of
choice for leading growth companies in the U.S. and a major contributor to
the greater economy and U.S. job market," Lee said.
Despite the remarkable gains in the Nasdaq, not all stocks have shared in
the bonanza. Indeed, the number of stocks that have gained on the year is
slightly larger than the list of losers.
According to Bloomberg, of the Nasdaq stocks that it tracks, 2,514 stocks are up for the year and 2,061 are down.
Additionally, as of last week only 903 stocks had matched or exceeded the 83 percent gain in the index as a whole. That's about 20 percent of the total number of stocks tracked.
The median gain for all Nasdaq stocks, according to Bloomberg, was about 7.5 percent, meaning half the Nasdaq stocks posted gains of more than 7.5
percent and half gained less than 7.5 percent.
Although the Nasdaq surpassed the 4,000 mark today, the significance to the
market will begin to wane, Murphy said.
"As we go higher up the ladder, 1,000 points will represent a smaller and
smaller percentage gain," he said. "It will become more of a headline
grabber than have any market significance."
He added that the Dow is encountering a similar experience with its 1,000
milestones. Murphy further noted: "Only recently, in the past year or so,
have people stopped talking about the Dow crossing in increments of 100
"People like round numbers, and the market uses a high degree of
psychology," he said.