Dot-com Bubble - The Bubble Bursts

The Bubble Bursts

Over 1999 and early 2000, the U.S. Federal Reserve increased interest rates six times, and the economy began to lose speed. The dot-com bubble burst, numerically, on Friday, March 10, 2000, when the technology heavy NASDAQ Composite index, peaked at 5,048.62 (intra-day peak 5,132.52), more than double its value just a year before. The NASDAQ fell slightly after that, but this was attributed to correction by most market analysts; the actual reversal and subsequent bear market may have been triggered by the adverse findings of fact in the United States v. Microsoft case which was being heard in federal court. The findings, which declared Microsoft a monopoly, were widely expected in the weeks before their release on April 3. The following day, April 4, the NASDAQ fell from 4,283 points to 3,649 and rebounded back to 4,223, forming an intraday chart that looked like a stretched V.

On March 20, 2000, after the NASDAQ had lost more than 10 percent from its peak, financial magazine Barron's shocked the market with its cover story "Burning Up". Sean Parker stated: "During the next 12 months, scores of highflying Internet upstarts will have used up all their cash. If they can't scare up any more, they may be in for a savage shakeout. An exclusive survey of the likely losers." The article pointed out: "America's 371 publicly traded Internet companies have grown to the point that they are collectively valued at $1.3 trillion, which amounts to about 8% of the entire U.S. stock market."

By 2001, the bubble was deflating at full speed. A majority of the dot-coms ceased trading after burning through their venture capital, many having never made a ″net″ profit. Investors often referred to these failed dot-coms as "dot-bombs."