Nasdaq Hits 5,000, Should You Buy?

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The news of the day was overshadowed by the Nasdaq Composite’s thrust above the 5,000 mark for the first time in 15 years.

The index, once known for its dot-com excess, now offers a broad representation of technology, consumer, biotech and financial stocks. Comprised of 2,571 companies, it is generally known for reflecting the performance of mid-cap stocks. However, the Nasdaq remains a solid representation of the technology sector with strong companies like Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN) and Cisco Systems, Inc. (NASDAQ:CSCO) on its list.

The Dow Jones Industrial Average and S&P 500 hit new all-time highs, up 0.9% and 0.6% respectively. Investors took a “risk-on” approach, selling utilities and bonds and buying stocks.

Monday was a busy day for corporate news. Cardinal Health Inc (NYSE:CAH) agreed to buy Johnson & Johnson’s (NYSE:JNJ) heart-product business. Costco Wholesale Corporation (NASDAQ:COST) signed deals with Citigroup Inc (NYSE:C) and Visa Inc (NYSE:V) as new credit partners. And Hewlett-Packard Company (NYSE:HPQ) announced it will buy Aruba Networks, Inc. (NASDAQ:ARUN).

Oil fell 0.3% to $49.59 a barrel, and gold futures declined 0.4% to $1,207.70 an ounce. The yield of the benchmark 10-year Treasury note rose to 2.08% from 2.00% on Friday as bond prices fell.

At Monday’s close, the Dow Jones Industrial Average rose 156 points to 18,289, the S&P 500 climbed 13 points to 2,117, the Nasdaq jumped 45 points to 5,008, and the Russell 2000 gained 9 points at 1,243.

The NYSE’s primary market traded 756 million shares with total volume of 3.4 billion. The Nasdaq crossed 1.9 billion shares. On the Big Board, advancers outpaced decliners by 1.5-to-1, and on the Nasdaq advancers, led by 1.9-to-1.

Nasdaq Chart
Click to Enlarge

Chart Key

There will be just one chart today in celebration of the Nasdaq’s new 15-year high. However, more impressive than its long-term march to a new high is the run from the October low at 4,116.60, an advance of 21.7% in less than five months.

Conclusion

While the Dow industrials and S&P 500 chug along barely making new highs, and the Dow transports have yet to confirm a Dow breakout, the Nasdaq has run like a beast on fire, propelled by AAPL and a host of hot biotech stocks and other solid mid- and small-cap performers.

My hat is off to those who had the courage and tenacity to stick with this most vulnerable of indices to see it through to new highs despite low volume and lacking breadth.

Currently, the future of all the other indices, especially the large-cap stocks of the Dow and S&P 500, is strangely more uncertain than that of the mid and small caps. This is mainly because the big boys are more dependent on foreign trade. They are subject to the unwelcome impact of trouble in the EU, China’s shaky economy, tensions in the Middle East, and an aggressive Russia whose leadership will do virtually anything to reestablish its old empire.

I believe there will be better opportunities to buy the stocks of the Nasdaq since the index is selling with a P/E in the mid-20s. But the small and mid caps still appear to offer less overall risk and more upside than the stocks of the more senior indices. Just don’t chase them now.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/daily-market-outlook-nasdaq-hits-5000-buy/.

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