Like the sun peaking out from cloud cover, global economic data brightened last week, so driving stocks higher. U.S. Q4 GDP was revised slightly lower, while the Greeks received a four-month extension on a financial lifeline. German and Chinese data piqued higher. And U.S. crude prices drifted lower.
NASDAQ 5K Reunion.
After 15 years wandering aimlessly, the NASDAQ index finally rose back to the 5,000 level. The last time it ascended to such heights? March of 2000. Immediately before the market fell into a two-year bear.
Unlike the last NASDAQ boom, recent ascension has little to do with information technology and everything to do with biotechnology. The Biotech Index is up nearly 900 percent since 2000, while the SPDR Technology index is down 7 percent.
The NASDAQ has nearly quadrupled in value during this six-year bull market. And unlike the eponymously named composite of 2000, this index comprises a more sober, reasonably priced list of stocks. Companies like Microsoft and Oracle have already surpassed their 2000 levels. But others, widely held then and today, have not. Including names like Cisco, Intel, Network Appliance and PMC Sierra. In fact, these have not come close to reaching their prior glory.
Today's NASDAQ trades at 32 times trailing earnings. Higher than the S&P 500 which trades at roughly 19 times profits. In 2000, however, the NASDAQ's P/E ratio was 175.
Aside from today's more reasonable valuations, investors might notice that stocks are less apt to segue into today's pop culture. In 1999, restaurants, pubs and other public social venues tuned into CNBC and other investment programming. Because people watched stocks for sport. Today? Those same venues actually show sports, as Main Street's casual interest in equities has reverted to the mean.
It took only 49 days for the NASDAQ to leap from 4000 to 5000 back then. After climbing above 5k on March 9, 2000, the index remained there for one more day. Then collapsed hopelessly into an extended bear market. This time around? It required more than 300 days to move from 4k to 5k.
Adjusted for inflation, a must when comparing equity values over long periods, the NASDAQ remains far off its highs. For it would have to reach 6,908 to have the same valuation possessed in 2000.
Bibi Goes to Washington
Israeli PM Benjamin Netanyahu spoke before Congress today, the lead up to which was a highly partisan, controversial process that saw Israel's leader siding with the GOP in what they believe has been the administration's dovish treatment of Iran.
The Israeli's view Iran as an existential threat to the world's only Jewish state. Rightfully so, as Iran's ayatollahs and top clerics have called for its obliteration. Thus, Iran's attainment of a nuclear weapon remains beyond the pale. Iran, on the other hand, claims its nuclear program is strictly for peaceful purposes. Though most sane observers strongly doubt those claims.
Netanyahu's speech was a strongly worded restatement of Israel's long-standing intent to derail Iran's nuclear ambitions. At any cost. Netanyahu believes that President Obama's "kid gloves" approach with the Iranians is essentially caving into their request to "deny the weapons but maintain the program." This, Israel claims, would enable the Iranians to quickly assemble a nuclear weapon in six to 12 months. As soon as the world's attention is diverted.
Recent wrangling have gone so far as to claim that the Obama administration threatened to shoot down Israeli jets if they decided to act unilaterally. In other words, things have gone beyond heated. The American-led deal with Iran should be ready for public consumption by late March, early April. Till then, things will certainly remain interesting.
The Good
Greece and the EU agreed to a four-month debt extension... Inflation remains subdued, with no deflation in sight... Weekly jobless claims fell back below 300k... Q4 GDP was revised lower, but beat expectations at 2.2%... Durable goods order beat expectations... Earnings reports strengthened, with the blended EPS growth rate at 3.7%... Michigan Consumer Confidence Index rose to 95.4... Pending home sales hit 18-month high...
The Bad
Fund managers and financial bloggers have become bullish (uh oh)... Jobless claims rose dramatically to 313k... The Ukrainian cease fire appears to be over as fighting has resumed... Existing home sales disappointed...
The Ugly
Congress is back in action! With seconds to spare before the Department of Homeland Security was defunded, Congress managed a one-week funding extension. So providing observers with a six-day reprieve before the next showdown.
