Nasdaq Slams Through New Floor
March 12, 2001 -- The Nasdaq roller coaster shows no sign yet of ending its plunge. Since peaking a year ago, the once glamorous high-technology index has declined by an incredible 60 percent in value — falling today to below 2,000 for the first time in 27 months.
As a spectator sport, there has never been anything quite like it. Joe Public saw the Nasdaq soar and wanted in. Today more than half of U.S. households own stocks, compared to one-third a decade ago. Technology stocks tripled in value in the late '90s, bringing in millions of new customers to mutual funds and brokerage firms.
But $4 trillion in market value has been lost since the peak last March. Yet many observers say tech stocks are still not cheap.
"If the economy doesn't begin to recover, what looks like a cheap stock today may indeed may not be cheap at all," said market analyst Hugh Johnson.
Both the Nasdaq's rise and fall stunned investors. For many rocketing values have been replaced by a sickening descent. The collapse to below 2,000 is yet another unhappy milestone
"Angry and disappointed" is how investor John Malones describes how he feels about his high-tech stock losses, which amount to tens of thousands of dollars.
"l feel very disappointed, frustrated," he said.
Pros See Long Wait for Next High
With many analysts saying today's high-tech stock prices are much closer to reality than those of a year ago, it's hard to find market professionals who expect the Nasdaq will be soon returns to its old highs.
"Where we are today is much more reasonable levels of valuation," said Phil Orlando, economist at Value Line Asset Management in New York. "Investors should perversely view the 60 percent correction in the Nasdaq as an opportunity, rather than something to fret about."
Others argue that some big technology companies are still overvalued. Charles Lierberman of Advisors Financial Center in Suffern, N.Y., points to Yahoo!, which has fallen more than 85 percent from its peak "and still trades at a P/E multiple in excess of 100."
Despite their steep slides, Cisco and Intel also still trade at much high price/earnings rates than most stocks, as does Yahoo. Lieberman and other analysts say the flame-out could continue.
Worries about the economy, and how far the Federal Reserve is prepared to go to revive it, infected stocks of every kind today. All 30 stocks in the Dow Jones industrial average finished the day lower, with General Electric falling 10 percent on rumors that it's earnings are in trouble.
"Despite the fact that [Fed chief] Alan Greenspan is forecasting a recovery in the second half of the year, simply stated, investors don't buy it," Johnson said.
Today also market a grim milestone for the broader S&P 500, which tracks 500 of the nation's best and biggest companies, most of them not in technology.
The S&P is now down almost 20 percent from its high of a year ago, officially putting it in bear market territory.
ABCNEWS' Betsy Stark contributed to this report.