Transcripts

The S&P 500 Cracks 1500

PAUL KANGAS: The Standard & Poor's 500 Index did something today it hasn't done in almost seven years, closed above the 1500 level. The index is considered a key measure of the stock market's performance. It is now just 25 points below its all-time high, set in March of 2000. Suzanne Pratt takes a look at the significance of 1500 for investors.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: While the Dow rather noisily broke past the 13,000 level, the S&P 500 quietly achieved a milestone of its own. Not since the dot-com bubble was deflating in September 2000 has the S&P 500 been above 1,500. It slipped below 800 in October 2002 and has taken all that time to rally back. It's now only 25 points from its all-time high. Just as 13,000 was psychologically important for Dow watchers, some experts say 1,500 has similar positive significance for the S&P 500. But stock market technicians say 1,500 is not a technical barrier. Still, Miller Tabak analyst Phil Roth says he sees no major technical indicators suggesting a serious correction is coming.

PHILIP ROTH, CHIEF TECHNICAL MARKET ANALYST, MILLER TABAK: I think the market is in the mature stages of an advance, but I've thought that for a year, so we've had an unusual market that has held up and made a little bit of progress. But it's made very little progress. In fact, the S&P is only a couple of percent higher than it was in December.

PRATT: In the seven years it has taken for the S&P 500 to work its way back to 1,500, much has changed for the index, most importantly market leadership. Energy stocks have been the best performing sector in the last seven years, returning 135 percent. Materials come in second. On the flip side, information technology and telecom services were sharp laggards. A variety of factors helped to push the S&P back into record territory. Most recently it has been corporate profits. With about 80 percent of S&P 500 companies reporting quarterly results, profit growth is up an average of nearly 8 percent. That's a far cry from the 3 percent analysts were forecasting a few weeks ago. Russell investment portfolio manager Stephen Wood says 1,500 for the S&P also means large cap stocks are back.

STEPHEN WOOD, PORTFOLIO MANAGER, RUSSELL INVESTMENT GROUP: Now we're getting both pistons of the market working, small-cap and large-cap. So, for the last 12 to 18 months, you're really seeing large cap and large cap growth reassert itself. So I think it's a much healthier market environment.

PRATT: Others say 1,500 for the S&P 500 is an accomplishment in itself, suggesting stocks are likely to move higher still. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.