The last time the Nasdaq composite index closed above 3,000 points, Bill Clinton was in the White House. Wall Street’s torrid affair with startup companies that did business using that newfangled technology, the Internet, was ending badly.
The date was Dec. 11, 2000. Just seven months earlier, at the peak of the dot-com frenzy, the technology-focused stock index set an all-time high of 5,048.62.
The implosion of that bubble would stretch out over more than two years, eventually bringing the index down to just above 1,100 in October 2002. That period included an eight-month recession and the Sept. 11 terrorist attacks.
In all, the Nasdaq would lose nearly 80 percent of its value. The rise of the index seemed just as dizzying in the years just before the turn of the millennium. The Nasdaq first closed above 3,000 on Nov. 3, 1999. It broke 4,000 less than two months later, and 5,000 less than three months after that.
A lot has changed in the stock market and technology industries during the Nasdaq’s long climb back over the past decade. At the height of the dot-com bubble, flashy startups like Webvan were the center of attention. The online grocery chain’s stock quickly doubled after it went public in late 1999, but it was bankrupt less than two years later after it tried to expand too fast.
Today, the biggest tech darling is also the company with the biggest value: Apple Inc. Unlike during the dot-com boom, when investors were paying for the hopes of future profits, Apple delivers earnings aplenty. In the fourth quarter of last year alone it earned $13 billion, giving it a relatively modest price-to-earnings ratio of 11.5, according to FactSet.
At the beginning of 2000, the peak of the dot-com frenzy, investors valued stocks in the Nasdaq composite index at an astronomical 175 times their per-share earnings over the previous year.
In late 2001 and early 2002, the companies that make up the Nasdaq composite lost money as a whole, making the total earnings negative and rendering it impossible to even figure a price-to-earnings ratio.
Since then, with the exception of the market’s collapse in 2008, Nasdaq stock prices have generally risen while their price-to-earnings ratios have generally fallen. The Nasdaq trades now at about 24 times earnings, according to Birinyi Associates. The Standard & Poor’s 500 trades at about 14.
This year, the Nasdaq has far outpaced the other major market indexes. It is up 16.7 percent so far this year, compared with 11 percent for the S&P 500 and 7.9 percent for the Dow.
Apple is by far the biggest component of the Nasdaq, making up 11.4 percent of the index. Without Apple, the Nasdaq would have gained 14.8 percent, according to Nasdaq.