Wall Street Beat: Nasdaq hits 5-year high
Though the rally started to flatten out Thursday, the Nasdaq was at its highest point since February 2001 and on the way to close out its best first-quarter rise since 2000
Follow @infoworldTechnology companies helped drive a broad market rally in the U.S. this week, spurring the Nasdaq Composite Index to a five-year high. Whether investors continue to pour money into technology, however, will depend on what happens during the next round of quarterly reports, starting in a few weeks.
The Nasdaq index (IXIC) jumped 38.32 points Wednesday to close at 2337.78. Though the rally started to flatten out Thursday, the Nasdaq was at its highest point since February 2001 and on the way to close out its best first-quarter rise since 2000. The Nasdaq is at more or less a midpoint between the peak of the dot-com bubble and the trough that followed the bust.
The exchange -- long seen as a barometer of IT fortunes since it is so heavily weighted with tech stocks -- hit its highest point, 5048.62, in March 2000, and was at 807 in March 2003.
Why the jump in share prices this week? In the topsy-turvy world of market psychology, some market watchers pointed to the Federal Reserve's interest-rate hike on Tuesday. Normally, rising oil prices and interest rates have a depressing effect on share prices, because they raise the cost of doing business and borrowing money. But the Fed's rate hike, an attempt to ward off inflation, indicates it believes business earnings will be strong -- a good thing for IT companies catering to corporate users.
In addition, though PC sales are expected to be soft this year as businesses digest a busy year of hardware buying in 2005, there is a glimmer of light in the software arena. IDC, for example, says that though global IT spending will grow by 6.3 percent in 2006, compared to 6.9 percent in 2005, and corporate spending on software infrastructure and security products will be strong.
IDC, along with most analysts, says the days of double-digit growth in IT are gone, however. In this environment, investors are looking at IT in terms of subsectors and companies -- rather than at broad swaths of the technology arena. IT's recent broad market gains are not likely to continue unless the quarterly reports due out in a few weeks are good across the board.
Meanwhile, several bellwether companies helped stir things up this week:
-- Qualcomm Inc. (QCOM) shares rose by $1.36 Wednesday, and again by $0.13 to close at $50.85 Thursday, after Cowen & Co. gave an "outperform" rating to the company and other players in the wireless sector.
-- Shares of market darling Apple Computer Inc. (AAPL) rose by $3.62 Wednesday and again by $0.42 to close at $62.75 Thursday. The company was seen to be boosted by Microsoft Corp. misfortunes: a delay in the release of Vista and antitrust pressure from the European Union.
-- Google Inc. (GOOG) shares jumped by $17.78 Wednesday as investors picked up shares before the Nasdaq stock is added to the S&P 500 index. Company shares dropped again Thursday, though, falling $6.54, as the market digested the news that the company will be issuing an additional 5.3 million shares of stock, in part to accommodate institutional investors that buy S&P index funds.
