New York: The Nasdaq composite index briefly cracked 3,000 on Wednesday for the first time since the meltdown in dot-com stocks more than a decade ago. The stock market sank but was still closing its best February in 14 years.
The milestone for the Nasdaq, heavy with technology stocks, came a day after the Dow Jones industrial average closed above 13,000 for the first time since May 2008, before the financial crisis that fall.
The Nasdaq's biggest component, Apple, topped $500 billion in market value, the only company above the half-trillion mark and only the sixth in US corporate history to grow so big. Apple could reveal its next iPad model next week.
In the broader market, stocks opened higher but lost their gains after about an hour. The Dow was down 32 points at 12,972 just after 11 am (1600 GMT). The Standard & Poor's 500 index fell two points to 1,370. The Nasdaq dropped five to 2,981.
Stocks were still on pace for their best February since 1998. The S&P 500 is up 4.2 percent for the month. The Dow has gained 2.6 percent, also its best February since 1998. The Dow opened the year with its best January since 1997.
Stocks opened higher after the government said that the economy grew faster at the end of last year than previously estimated - a 3 percent annual rate, the best reading since the spring of 2010.
They turned lower after Federal Reserve chairman Ben Bernanke spoke on Capitol Hill and made it appear less likely that the Fed will buy more bonds to juice the economy. Gas prices will add to inflation, Bernanke said, while unemployment is falling faster than expected.
Inflation would make bond-buying less appetizing for the Fed because it increases the money supply and could make prices rise even faster. Unemployment must remain high for the Fed to justify such an aggressive policy.
US Treasury debt plunged on speculation that the Fed wouldn't enter the market again. The yield on the 10-year Treasury note spiked to 2.02 percent during his remarks, from 1.94 percent a few minutes earlier. Bond yields rise as their prices fall.
The Dow, which had been up by as many as 51 points, reversed course as Bernanke started speaking. It turned negative within the hour.
The price of gold was virtually unchanged until 10am, just as Bernanke started speaking, then fell more than $70 an ounce. It recovered some of its losses and was down about $50 an ounce at $1,738.
The Nasdaq has gained 15 percent this year, compared with 6.5 percent for the Dow and 9 percent for the S&P 500. The Nasdaq has risen almost as much this year as it did in all of 2010. It edged lower in 2011.
The strength of tech stocks is no surprise when you consider the licking they took during last year's market gyrations. Tech stocks tend to be more risky and rise faster as investors regain confidence in the economy.
The Nasdaq also is benefiting from economic currents that could carry them even higher. Many companies put off replacing worn-out technology during the recession and now are investing again.
There's also a growing global market for technology, and big tech companies face less competition these days when they try to acquire smaller ones. Established companies like IBM and Oracle can be picky about buying only companies that will increase their earnings.
The gains have some analysts on the lookout for another tech bubble, like the one that yanked the Nasdaq from 5,132 in February 2000 down to 1,792 in October 2001.
"It's justifiable to worry about exuberance," said Sam Stovall, chief equity strategist at S&P Capital IQ. But he said he expects the broad market to rise another 3 to 10 percent in the next few months before hitting a ceiling and correcting downward.
"It's momentum, combined with too many investors on the sidelines," Stovall said. "As the market blows past these benchmarks, these investors selectively throw in the towel" and buy stocks whose prices are rising.
In corporate news, Dreamworks Animation SKG Inc. plunged 11 percent after the maker of "Kung Fu Panda" said its fourth-quarter profit fell 71 percent on weak DVD sales.
First Published On : Feb 29, 2012 22:38 IST