The S&P 500 traded above the 1,200 mark today, for the first time since Aug. 8, 2001.

The first time the index crossed the 1,200 plateau was on Dec. 21, 1998. “Equity markets have really come a long way in such a short period of time, with the S&P 500 up 6.1% since the November election and 12.9% since the recent August 12, 2004 lows,” said Howard Silverblatt, market equity analyst at Standard & Poor’s, in a release. “As a result, some profit taking can be expected in the near-term, but the longer term outlook still remains positive, but slow and most likely bumpy.”

Standard & Poor’s data shows that today’s market is a far different one from the one that existed back in 2001. At year-end 2001, the trailing 12-month operating P/E on the S&P 500 was 29.6, compared to the current 18.6. In addition, 351 issues paid a dividend at the end of 2001 compared to the current 376, and that cash and equivalent for the S&P industrials stood at US$353 billion compared to the current record high of US$593 billion (after adjusting for the special Microsoft distribution of US$32.6 billion).

“While both earnings and dividends payments are setting new records and balance sheet cash is at an all time high, prices have been slower to recover from the October 2002 lows. While we are up 54% from our lows, we are still 21% off our highs, with information technology still off 67%,” continues Silverblatt. “The underlying fundamentals of the S&P 500 companies have been improving, but investors are no longer willing to pay the exorbitant P/Es that dominated the market several years back.”

Standard & Poor’s data also highlights the drastic change of sector representation in the S&P 500 over the years. In March of 2000, information technology had climbed to 34.5% of the index market value from under 10%. The sector’s weighting then deteriorated to 12.8% in October of 2002, and now stands at 16.4%.

Looking ahead, S&P expects earnings, dividends and prices to continue to increase at a moderate rate for 2005. Standard & Poor’s Investment Policy Committee expects the total return for the S&P 500 to be 10.1% in 2005, with operating earnings expected to increase 10.5% for the period. Price expectations, however, are not uniform, with consumer staples and information technology both expected to fair better than the index and telecommunications and utilities expected to under-perform it. “The slower price growth also reflects investor uncertainty, as well as their continued resistance to again pay high premiums on expected earnings,” said Silverblatt.

In early afternoon trading, the S&P 500 was at 1,200.36.

http://www2.standardandpoors.com/spf/pdf/index/121404_US.pdf