Comment on Nasdaq Record: Then and Now

NEW YORK (AP) — Fifteen years after peaking during the dot-com boom, the Nasdaq composite has reached a new all-time high. The headline number aside, the Nasdaq today is very different from the index and the overall market at the height of the technology boom, says Karyn Cavanaugh, a senior market strategist at Voya Investment Management. Taking the effect of inflation into account, the index would have to reach 6,908 to match its highs from 15 years ago. Tech stocks are poised to benefit as companies increase their spending on equipment and software to cut costs and improve productivity. Health care stocks have been climbing as investors bet that biotechnology companies will discover the next blockbuster drug. Together, tech and health account for almost two thirds of the Nasdaq's market value. Powered by tech and health care, the Nasdaq has climbed 22 percent over the past year, a more tempered rise than the 109 percent surge in the year before its last peak in 2000. Telecommunication companies were also a big component, accounting for 12 percent of the index's market value versus 0.8 percent now. The price-earnings ratio of the Nasdaq, a measure of how much investors are willing to pay for every dollar of earnings the companies in the index generate, is 21. Both the Standard & Poor's 500 index and the Dow Jones industrial average are trading close to record highs from last month, The stock market is being underpinned by solid company earnings and optimism that the economy will continue to strengthen gradually. Apple is the titan and Microsoft is a distant second with a market value of $356 billion. The top 20, however, also includes Starbucks, pharmacy benefits manager Express Scripts and retailer Costco. Interest rates are close to zero, and while many economists expect that Fed policy makers will start raising rates later this year, the pace of increases is likely to be steady.