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Techs on a bull run
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November 3, 1999: 3:53 p.m. ET
Nasdaq moves above 3,000 mark, but analysts expect more volatility
By Staff Writer John Frederick Moore
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NEW YORK (CNNfn) - Technology stocks have helped drive the Nasdaq composite index to record-high levels. But while analysts expect the upswing to continue, investors should expect more volatility, as well.
In Wednesday trading, the Nasdaq rose 46.21 points to close at 3027.84, according to preliminary results. The index initially broke the 3,000 level Tuesday, but Wednesday was the first time the Nasdaq closed above the landmark figure.
Considering that three of the top five stocks in the S&P 500 -- Cisco Systems Inc. (CSCO), Intel Corp. (INTC) and Microsoft Corp. (MSFT) -- are technology stocks, it's easy to understand why technology issues have been driving the market.
The Nasdaq composite index has had a steady climb since last year
"Technology stocks have been leaders for good reason," said Hugh Johnson, chief investment officer at First Albany. "The economy is growing 3.5 percent per year, while spending on information-processing equipment is growing 19.1 percent a year, after inflation. And spending on computers and peripherals is growing at a 41.1-percent rate. Technology is reflecting what lies ahead for the economy."
Among technology stocks on the Nasdaq in Wednesday afternoon trade, Intel climbed 2-1/4 to 79-3/4, Oracle Corp. (ORCL) added 4-5/16 to 57-5/16 and Sun Microsystems Inc. (SUNW) rose 2-7/8 to 106-9/16.
"The Nasdaq is obviously very heavily weighted in technology and, as a consequence, with the technology stocks being the ones that we see the greatest growth prospects in the future, I think that it's going to continue to move," said Ellen Harris, portfolio manager at the PaineWebber Growth Fund.
"Although I think as we move through the next couple of months, there could be a fair amount of volatility there," she added.
Volatility and technology aren't strangers to each other, as evidenced by recent swings in the sector.
Part of the reason, analysts say, is that none of the sectors within the technology market have taken a consistent leadership role.
Johnson said investors have been moving away from computer companies toward communications, software and semiconductor issues. Even those sectors, however, have been on a seesaw ride over the past few weeks. And Internet stocks are in a world unto themselves.
Johnson noted that individual stocks, not groups, rule the day, citing Oracle, Sun Microsystems and Cisco among the strongest performers in the tech sector. It's worth noting that all those companies come from different segments within the sector.
"It's very hard to make sweeping statements when it comes to technology," Johnson said.
What no one doubts, however, is that technology stocks will continue to be the leaders of the broader market.
"I think over the next five years, instead of seeing 10 of the top 100 holdings in technology, you'll probably see 25 or 35 percent," said Alberto Vilar, portfolio manager at Amerindo Technology Fund. "You're going to see a number of Microsofts" in the next few years.
But even as the volatility continues, analysts believe investors would be wise to stick with technology stocks.
"I don't worry about volatility," Johnson said. "I worry about down."
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