E C O N O M I C R E P O R T O F T H E P R E S I D E N T

funds rate (the interest rate that banks charge one another for overnight borrowing)by 75 basis points in three steps, fully reversing the rate cuts it hadinstituted in the second half of 1998 during the global financial crisis. Theyield on 30-year Treasury bonds rose more than 1¼ percentage points over thecourse of the year, reflecting a number of factors in addition to the Fed ratehikes. These included a rebalancing of international portfolios as the financialcrisis receded, and concerns that continued strength in the U.S. economywould cause the Federal Reserve to further increase the Federal funds rate.The stock market recorded another year of strong gains, with the S&P 500index of stock prices rising 20 percent in 1999 (Chart 2-8). But the overallstrength of the stock market in 1999 masks a sizable disparity in performanceamong stocks. In 1999 fewer than half of the stocks in the S&P 500 indexrose in value. In contrast, despite similar overall growth, during the first 4years of the bull market over 70 percent of those stocks rose in any one year.Stock gains were concentrated in a few sectors, mostly those associated withhigh technology. In the mid-1990s the technology-heavy NASDAQ indexgrew at about the same rate as the broader S&P 500, but its growth rate hasbeen about triple that of the S&P 500 in the last 2 years. Even more impressiveis a popular average of Internet-related stocks, which increased about 160percent per year over the past 2 years.Chapter 2 | 65