Mapping the market's wild ride
The Dow keeps reaching new highs, but the other major indexes have yet to catch up. Here's a graphic look at a ragged rally.
(Fortune Magazine) -- Just think about all the things the Dow Jones industrial average has had to overcome to surpass its January 2000 high: war, ballooning federal debt, rising interest rates, soaring oil prices, a housing bust. Yet there it is, perched above 12,000 for the first time (although still not at a new high when adjusted for inflation). For now, the Dow stands alone. The S&P 500 index is still about 10%shy of its record, and the Nasdaq, hampered by its heavy load of tech stocks, isn't anywhere near its peak. For a closer look at how the markets have performed since 2000, open the gatefold at right.
MAPPING THE MARKET: FROM THE HIGHS OF 2000 TO TODAY
BACK ON TOP Here's how the 30 stocks currently in the Dow have fared since Jan. 14, 2000.
It was the dawn of a new century. On Jan. 14, 2000, the Dow Jones industrial average closed at a new high of 11,723. But the dot-com bubble soon burst, taking the rest of the market down with it. It would take nearly seven full years, but powered by old-economy stocks like Caterpillar (Charts), Altria (Charts), and Exxon Mobil (Charts), the Dow finally surpassed its high on Oct. 3, 2006, and closed above 12,000 for the first time on Oct. 19. Purists point out that to surpass the previous peak in inflation-adjusted terms, the Dow would have to climb well past 13,000.
Then and Now When the Dow set its previous record, inflation was higher than it is today. But by many other measures, the economic climate was better in 2000.
Inflation Rate Jan. 2000: 2.7%
Oct. 2006: 2.1%
Jan. 2000: 4.0%
Oct. 2006: 4.4%
Real GDP Growth
Jan. 2000: 7.3%
Oct. 2006: 1.6%
Annualized quarterly change Light, sweet crude
Nymex price per barrel
Jan. 2000: $26
Oct. 2006: $61
Jan. 2000: $5.7 trillion
Oct. 2006: $8.5 trillion
Since World War II ten bull markets (defined by Dow Jones as an upward move of at least 20%), have come and gone, averaging 1,584 days and a gain of 140%. The first postwar bull remains the champ, at more than 12 years and a 355% advance. The current rally, No. 11, clocks in as middling in length, and its 66.1% gain is subpar - but who knows how far it will go from here?
Miles to go Fueled by high-octane tech stocks, Nasdaq had the gaudiest gains in the late-1990s rally and took the deepest dive in the crash, as many dot-com and telecom issues lost 90% of their value or more. Now the Internet is hot again and broadband cables are buzzing with life, but Nasdaq still sits at barely half its bubble high.
Still Behind Many computer and Internet companies that saw their shares soar to dizzying heights in the bubble have not come anywhere near their former peaks. Here's a sampling.
Over long periods of time, the S&P 500 typically tracks the Dow closely. But while the broad index has climbed 78% from its low, it remains nearly 10% below its all-time closing high of 1,527, set on March 24, 2000.
Hot or Cold?
It's easy to see why the S&P 500 is still lagging. Despite the surge in energy and consumer-staples stocks, the index hasn't been able to overcome the drag of the struggling telecom and infotech groups. Here's how the sectors stack up since March 24, 2000.
Consumer staples: 58.4%
Health care: 19.9%
Consumer discretionary: 2.0%
S&P 500: -10.5%
Telecom Services: -53.3%
Information Technology: -64.6%
From the November 27, 2006 issue