Nasdaq Pegs 2000 Again

Investigators fear that much of the meat from the cattle slaughtered at the plant that day has already been consumed.

Fashionably Late

The Nasdaq finally joined the holiday party, after lagging the other major averages through much of December, as investors shifted out of high-flying technology and small-cap stocks and into more stable sectors like cyclicals and energy.

"Anecdotal evidence, mostly from tax professionals, suggests that much of the Nasdaq underperformance was related to tax-loss selling," and not a true shift in leadership, said Tower. "In our experience, leadership rarely changes smoothly. It's much more common for leadership to change during a market correction."

The January Effect has apparently come early this year, as many anticipate investors will repurchase their winners sold to offset losses from prior years. The Composite has regained all of its ground since its Dec. low and is up nearly 1% for the month, but it is still trailing the Dow, which is up almost 6%.

However, some of the Nasdaq's biggest names have seriously lagged, even during the index's recent upturn and could play some serious catch-up in the coming year. For example, Intel (INTC Quote) shares are still down more than 6% on the month, but its prospects look bright according to Sanford Bernstein, who highlighted the company in a report today that boosted its 2004 forecasts for the industry.

Microsoft (MSFT Quote) may also be poised to outperform; it is up only about 6%, despite about a 45% surge for the Nasdaq. J.P. Morgan recently initiated coverage of the company with an overweight; the brokerage believes new products and increased focus on small business will help boost revenue in 2004. Microsoft's year could well determine if stocks build on 2003's strength.

"The big question in terms of market averages is Microsoft," said Tower. "If Microsoft can rebound, it will have a big effect on both the Dow and the Nasdaq."

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