Interesting Article about the past year's stock market:
Technology Stocks Take Center Stage
By EILEEN GLANTON
.c The Associated Press
NEW YORK (AP) - In 1999, American investors made their biggest bets on the future, embracing any company that offered smarter, faster or more accessible technology - whether or not it earned a profit.
But while major indexes soared to a string of new highs that culminated on the last day of the year, the overall market did not share in the great fortune.
``The market looked like a huge warehouse with a wild party going on in one corner,' said Tom Madden, chief investment officer for domestic equities at Federated Investors of Pittsburgh. ``If you wander outside, or even if you're just in the wrong corner, it might look like there's nothing going on.'
On the surface, stocks had a fabulous time in 1999. The Dow Jones industrial average rose 25.2 percent and the Standard & Poor's 500 rose 19.5 percent. The tech-driven Nasdaq composite index's annual gain of 85.6 percent was more than any other major index in history.
A market enthralled by the promise of the future made any worries about the past and present seem quaint. Memories of the global financial crises of 1997 and 1998 faded in a haze of upbeat projections about the prospects of Japan, South Korea and Latin America. Fears that the U.S. economy's expansion was running out of control were eased by confidence about increasing productivity.
But most of the gains were racked up by the biggest and brightest high-technology companies, while thousands of other stocks languished. The Nasdaq composite dominated the market for the second half of the year, rising past 3,000 and straight through 4,000 while the Dow and the S&P 500 pitched in a narrow range until surging in late December.
The average stock in the S&P 500 rose only about 10 percent. Compare that to Qualcomm Inc., a wireless communications company that saw its stock soar more than 2,600 percent in 1999.
The 30 stocks in the venerable Dow had divergent results too, although its leading player wasn't a technology stock - Alcoa rose 125 percent while Philip Morris, the worst-performing Dow stock, fell 53 percent under the weight of tobacco litigation.
``It's a tricky market,' said Larry Wachtel, market analyst with Prudential Securities. ``The indexes tell you one thing and the individual stocks tell you another.'
Earlier in the year, market mavens worried that the soaring valuations of technology stocks would eventually crumble, putting an end to the long bull market. But in the last few months of 1999, many leading high-tech companies extended their remarkable gains amid a growing sense that they're worth every dollar.
That theory spread from Wall Street to Main Street in a book titled ``Dow 36,000.'
``Stocks were undervalued in the 1980s and early 1990s, and they are undervalued now,' argued James K. Glassman and Kevin A. Hassett. ``Stock prices could double, triple, or even quadruple tomorrow and still not be too high.'
Most analysts aren't ready to pencil in gains that sizable for the Dow, which remains heavily weighted with old-style industrial stocks even with the addition this past year of Microsoft and Intel. But market watchers do expect triple-digit growth for many technology stocks.
``Information technology will lead economic growth in the future,' said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. ``Tech is where the action is, and people anticipate rosy earnings down the road.'
By contrast, investors dumped shares of many drug companies, onetime darlings of the market. Consumer goods stocks also fared poorly, with Gillette declining about 12 percent over the course of the year. Analysts expect brighter futures for both of those sectors in 2000, as foreign nations increase spending on drugs and consumer staples.
Of course, the market faces some potential trouble spots in 2000. Interest rates, on the rise in 1999, could face further increases if the Federal Reserve determines that the economy is still growing too quickly.
Some analysts also believe the U.S. stock market will face more competition next year as resurgent markets in Asia and Europe attract money that's been funneled into U.S. equities in the past two years.
On the other hand, the rest of the world could become the U.S. market's biggest ally. As the global economy continues to bounce back from crushing financial crises, many nations are spending heavily to bring technology up to par.
``The message of the market is clear,' said Edward Keon, director of quantitative research at Prudential Securities. ``Technology will likely continue to play a larger role in the lives of people worldwide, and technology should therefore continue to gain a larger share of the world's money.' |
