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ERROR: type should be string, got "https://www.wsj.com/articles/SB952732428168950565\nThe Trader\nNew Beats Old Again as Nasdaq Tops 5000, Dow Falls\nAndrew Bary\nMarch 13, 2000 12:01 am ET\nN ew Economy boosters enjoyed further vindication last week as the Nasdaq cracked the historic 5000 barrier and as the Dow Jones Industrial Average fell 4.2%, dropping below 10,000, hurt by the plunge in Procter & Gamble , formerly one of the most redoubtable of blue chips.\nThe Nasdaq Composite surged 134 points, or 2.7%, in the five sessions to finish at a record 5048, boosted by gains in such stalwarts as Microsoft , Oracle , eBay , Dell Computer and Yahoo . The Nasdaq now is up 24% this year. While the Nasdaq continued its recent surge, the Dow declined 438 points to 9928, capped by a drop of 81 points on Friday. The Dow now is off 13.6% this year.\nThe week's big shocker came from P&G, which plunged 34 1/2, or 39%, to 53 3/8, after warning Tuesday that its profits in the current quarter would be significantly below Wall Street expectations. Procter's share price is now back where it stood in early 1997, and it trades for a fairly reasonable 16 times projected calendar 2000 profits.\nP&G's announcement accelerated the flight from the major consumer stocks as investors feared more profit disappointments. Those concerns were borne out Friday when Dial , maker of Dial soap and Purex detergent, said it sees a drop in its first-half profits. Dial fell 4 1/2 last week to 11, including a 3 1/4 -point drop Friday, leaving the stock far below its summer peak of 38 and trading for just nine times estimated 2000 profits. Coca-Cola dropped 5 to 44 7/8, half its June 1998 high. Gillette declined 4 3/8 to 30 1/8, leaving it more than 50% below its March 1999 peak. Clorox was off 11 5/16 to 29 7/8 . Colgate Palmolive , one of the few consumer-products giants that has consistently met profit expectations in recent years, wasn't granted any immunity as it fell 11 1/8 to 42 3/4 . Virtually every big consumer and drug stock hit 52-week lows at some point during the five sessions, although the drugs did stage a rebound later in the week.\n\"Procter was the kind of stock that might not have been exciting, but it was seen as safe. Yet look how much money people lost in it,\" says Byron Wien, chief domestic strategist at Morgan Stanley Dean Witter. \"That only added to the enthusiasm for the New Economy stocks.\" Wien says that it's tempting to say that the valuation of the favored technology stocks is getting ridiculous, but investors clearly believe that almost no price is too high to pay for tech winners.\nThe wreckage in the consumer sector illustrates one of the ongoing stories in the stock market in the past year: the contraction in price-earnings multiples outside the tech sector. It's increasingly rare now to find major companies trading for much more than 30 times projected 2000 profits.\nIn the financial sector, the P/E ceiling exists around 20 with only a handful of issues, including American International Group , above that level. American Express trades for 20 times projected 2000 profits; Citigroup has a P/E of 15; Freddie Mac and Fannie Mae have multiples of around 11. Regional bank stocks generally fetch less than 10 times earnings, while many thrifts, like Washington Mutual (see \"Guilt By Association \"), trade for around seven times earnings.\nLooking at the consumer sector, Coke is one of the few big stocks trading for 30 times profits, but it's worth noting that Coke once commanded almost 60 times earnings. Among the leading drug stocks, only Pfizer , Warner-Lambert and Amgen are accorded more than 30 times profits, but Pfizer, which now trades at around 33 times earnings, once fetched over 50 times earnings.\nLast year, there were some notable non-technology stocks that bucked the tide and advanced sharply. But this year, many of those erstwhile winners, including General Electric , American Express, AIG, Wal-Mart Stores and Home Depot , have come under pressure. AmEx is off 23% to 126 11/16; Home Depot has fallen 22% to 53 1/2 ; AIG is off 23 to 83 and Wal-Mart has declined 31% to 48 1/8, giving it a forward P/E of 33.\nMultiples of over 100, of course, are common in the tech sector. Cisco Systems , at 136 5/8, trades at 115 times projected calendar 2000 profits, while Oracle, at 81 5/8, sports a multiple of 130. The super highflyers like Broadcom fetch over 300 times earnings. At least they have earnings.\nT he two leading brokerage stocks, Morgan Stanley Dean Witter and Goldman Sachs , continued their recent run amid growing interest from growth and momentum investors.\nOnce viewed as volatile and cyclical, Morgan Stanley and Goldman now are being viewed as technology surrogates owing to their leadership in underwriting and advisory work in technology, media and telecommunications around the world.\nMorgan Stanley gained 7 1/2 to 86 5/8 after its nine-point rise in the prior week. Goldman gained 9 3/4 to 112 1/4 after hitting a record 119 in intraday trading Friday, while Merrill Lynch was off 2 to 105. There were rumors Friday that Chase Manhattan was interested in buying Goldman, but the speculation doesn't make much sense. Chase, which fell 2 1/2 to 78 1/16, lacks the P/E multiple-just 13 times projected 2000 profits-to provide the currency to acquire either Goldman or Morgan.\nMorgan Stanley fetches about 21 times estimated 2000 profits of $4 a share, but that profit projection probably will prove low if current trends persist. Some think the company could earn $5 this year. Goldman trades for 22 times projected 2000 profits of $5 a share, yet the actual figure could top $6. Given their rising valuations and strong prospects, Goldman and Morgan Stanley probably see little reason to consider any merger proposals.\nVeritas Software , the hot provider of database software, has soared 77% in 2000 to 168 11/16 and has appreciated eightfold in the past 12 months from 18, giving the company a market value of $66 billion. The stock now trades for a stunning 357 times projected 2000 profits of 47 cents a share.\nVeritas' rich valuation ultimately could leave it vulnerable to a sharp decline, but the stock soon could get an added boost if Standard & Poor's decides to add the company to the S&P 500 Index. Veritas has a good shot at getting into the S&P 500 because it's now the largest company in the S&P 400 mid-cap index by a wide margin. About 80% of the additions to the S&P 500 come from the S&P mid-cap index.\n\"I think Veritas will be next\" to join the S&P 500, says Diane Garnick, derivatives analyst at Merrill Lynch. She notes that Veritas now accounts for over 6% of the mid-cap index, double that of the secondlargest company, Siebel Systems. Garnick says that S&P likes to promote huge companies from the mid-cap index into the S&P 500 for an obvious reason-they've outgrown their mid-cap status.\nVeritas' weighting in the mid-cap index is nearly as large as that of America Online before AOL was moved to the S&P 500 in late 1998. Veritas is about three times the size of the average member of the S&P 500.\nDavid Blitzer, who heads the index committee at S&P, wouldn't comment on the Veritas situation other than to say that \"large companies\" in the mid-cap index usually are \"likely candidates\" for admission to the S&P.\nIf S&P does add Veritas to the S&P 500, the company's share price could rise sharply as index funds scramble to buy it. Just look what happened to Yahoo, which appreciated over 50% last December following the announcement of its addition to the S&P 500. Veritas might not enjoy that kind of gain, but it could still rise markedly because of the index-related buying and the limited float in its shares.\nSeagate Technology , the disc-drive company, owns 128 million Veritas shares, or 33% of the 388 million shares outstanding. Seagate probably would love to see Veritas join the S&P 500 partly because it would give the company an opportunity to sell a big block of Veritas to index funds. Seagate, which has been mentioned favorably in this space several times, rose 9 1/4 to 64 1/4 last week and is up over 50% this year. But Seagate still trades at a discount to the value of its Veritas stake, even if that stake is adjusted for taxes.\nSeagate's interest in Veritas is worth $21.5 billion, or $100 per Seagate share (about $65 per Seagate share after taxes). Seagate's other assets, including cash and a stake in Sandisk, are worth over $15 a share. The company's core disc-drive operations could be worth another $20-$30 per share.\nOne reason for Seagate's rise last week was renewed optimism about pricing in the depressed disc-drive business. Should this business revive, Seagate would be the major beneficiary because it's the industry leader with huge operating leverage. Seagate also has some promising venture-capital investments and it has been aggressively buying back its own stock, using the proceeds from partial sales of its stakes in Veritas and other investments. Seagate's fans say that, while the stock has appreciated recently, it remains one of the cheapest plays on the highly valued tech sector.\nIndex funds tied to the S&P mid-cap index could get a big performance boost from Veritas' departure to the S&P 500. Here's why: S&P 500 index funds, which control about 10% of the index, would need to buy Veritas, lifting the mid-cap index in the days before Veritas's exit. And midcap funds would have to rebalance their portfolios by selling Veritas and buying the other 399 stocks in the index. In the week leading up to AOL's addition to the S&P 500 in late 1998, the S&P mid-cap index surged 7%, while the S&P 500 was little changed.\nThe Trader, Part 2"