 | MONEY
|
| HOME | PRICE GUIDE | BUSINESS | SPORTS | OPINION | SPECIALS | STORE | ARCHIVES | CONTACT |
|
|
Nasdaq powers to 4 1/2 year high - Money Matters for 11/22/05
The Nasdaq reached a 4 1/2 year high today on heavy volume, closing up 11.89 to end the session at 2253.56. It was the highest close since June 7, 2001, when the index closed at 2264.00.
The number is significant in that the Nasdaq has taken so long to recover from the dotcom bust of early 2000, when the index reached over 5000 and then went into a prolonged descent, finally bottoming out on October 8, 2002 when the Nasdaq hot the floor at 1109.64.
Anybody who saw that as a rock solid bottom can now see, just over three years later, a 100% return and a healthy tech sector in the US economy. While the NYSE is also making record highs, the stodgy Dow 30, is still 170 points from its 52-week high, but also less than 10% its all-time high over 11,500, also reached in early 2000.
The Nasdaq is less than half of its all-time high, suggesting that there indeed was a "tech bubble" and that it really did burst before 9-11.
That said, the best companies in America are now tech-related or relatively new, unburdened with high employee and legacy costs, expensive pension plans and restrictive labor agreements. Tech companies are now the best positioned to gain from the continued restructuring of the American economy - from industrial to technological - as the internet, wireless communications and other innovations not only convert the economy from a product-based environment, but also are converting products into services.
Today's market rally was fueled by the release of Fed minutes from their November 1 meeting that suggested the long string of interest rate increases could come to an end soon. That's not just wishful thinking, but probably planning by the maestro, Alan Greenspan, as he will exit the Chairmanship in January, ostensibly to be replaced by Ben Bernanke. Greenspan likely would want to give his successor a "level playing field" to begin his tenure.
If that's the case - and I've been screaming in this space for months that the Fed shouldn't be raising rates - the Fed funds rate could - and probably should - level off at somewhere between 4.5 and 5.25%. It's a rate at which investors can buy bonds with a reasonable expectation of return, would induce some savings as banks offer accounts with 4-5% interest, and that would not be overly expensive to companies and not dampen the housing market.
We could, with a cessation of the rate increases and benign oil prices, avert a slowdown in 2006 and beyond and continue with the post-recession expansion. The markets are reflecting some confidence right now and that bodes well for coming months and years. The next step is to get federal deficits down and turn around some of the odious tax policies of the Bush administration. Bush and his administration are losing support from Congressional republicans at an accelerating rate, and, if indications are correct, the presidency of George W. Bush is about to come to an early and abrupt end.
Dow Jones: +51.15; 10,871.43 close
NYSE Advancers: 1953
Nasdaq Advancers: 1673
NYSE New Highs: 211
Nasdaq New Highs: 183
Gold: +3.40; 492.90 close
|
|
