The Nasdaq Stock Market's composite index closed above 4000 for the first time yesterday, the latest in a run of milestones that underscores the degree to which technology is driving the fervid U.S. economy at century's end.

Taken by itself, yesterday's gain was a symbolic benchmark in a year in which the technology-packed stock index rose an astonishing 84 percent, the biggest 12-month gain ever--barring a massive sell-off today--by a major U.S. stock market measure.

But it also raised anew recurring questions on Wall Street about whether the technology firms behind the rally can ever justify their stock prices with real-world business performances and whether this bull market is teetering on a cliff.

Or, to use the metaphor of choice among market-watchers, is it a bubble that will inevitably burst?

"It will absolutely burst," said Charles Hill, director of research at First Call Corp., an equity research firm in Boston. "But trying to predict when is absolutely impossible."

This uncertainty is buffeted by how traditional measures of Wall Street success seem to be getting discarded like old ticker tape. For instance, take the price-to-earnings ratio, which is the total market value of the nearly 5,000 stocks in the Nasdaq index divided by those companies' actual earnings over the previous 12 months. That ratio now stands at roughly 200. It was 22 at the start of the bull market in October 1990, according to James Stack, president of InvestTech Research, a market research consultancy in Whitefish, Mont.

By comparison, the ratio for the broader Standard & Poor's 500-stock index is 33, Stack said.

Even given these precarious measures, the Nasdaq's 4000 breakthrough highlighted the astonishing rate at which tech stock valuations have swelled this year. The Nasdaq composite index opened trading in January at 2219, tore through the 3000 mark in October and closed yesterday at 4041.46.

The last time a major market indicator performed as well over the course of a year was 1916, when the Dow Jones industrial average rose 81.49 percent.

"My reaction to this is profound awe and silence," said Laszlo Birinyi, of Birinyi Associates, a stock market research group in Westport, Conn. "The market is telling us there's a major revolution taking place."

That revolution is anchored in technology, borne out by the stock market performance of the high-tech sector's signature and unknown companies alike. Nearly 1,000 Nasdaq-listed firms--more than one in five--have seen their shares at least double in value this year, according to Birinyi Associates data issued last week. In the most dramatic gain yesterday, shares of cell phone maker Qualcomm Inc. rose 31 percent in regular Nasdaq trading, from $503 to $659, closing out a year in which its stock ballooned by 2,400 percent.

And so it goes.

"What's so truly amazing is that seven years ago, 50 percent of the companies in the Nasdaq were not even in existence," said Richard Cripps, chief equity strategist at Legg Mason Wood Walker Inc. in Baltimore. The top 100 companies in the Nasdaq have a total stock market valuation of $3.2 trillion, he said, accounting for 20 percent of the entire equity universe; seven years ago, they accounted for less than 5 percent, he said. "I'm most surprised by the sheer magnitude of everything," said Alfred Goldman, the chief market strategist at A.G. Edwards & Sons Inc. in St. Louis.

"If you had told me a year ago that the Nasdaq would be up over 80 percent this year, I would have hung up on you."

Goldman compares the Nasdaq's rise to that of a hot-air balloon, not a bubble. Bubbles burst, he said. "But hot-air balloons go up, they make a little noise, and maybe they run into an air pocket and drop a little. And then they'll rev up the engines and go up again."

Goldman predicts that the Nasdaq composite index will rise to between 4800 and 5000 by the end of next year.

But others see the coming year as less certain, and they foresee a number of pivotal indicators ahead. Cripps, of Legg Mason, said many market observers will be looking closely at the business progress made by Amazon.com, the online retailing powerhouse, which has not come close to being profitable despite being one of the chief beneficiaries of the Internet stock boom.

A number of Internet sector analysts have projected that Amazon would become profitable by the first quarter of 2001. "If in midyear, Amazon says they're not going to make it, it will be a major event," Cripps said.

He also said the performance of upcoming initial public stock offerings by Internet firms will be telling. New stock offerings, which this year have accounted for some of the most dramatic one-day gains in history, will come under greater scrutiny as more of them flood the market.

"We'll see pretty soon through these new stocks whether the market is saturated yet," he said.

Many stock analysts are predicting a short-term drop in the next few months as investors unload shares they may have waited to sell for tax purposes.

But in the overall scheme, Wall Street was taking the 4000 milestone as another chance to feel good about itself.

"This represents another chance to pause and reflect," said Megan Graham-Hackett, director of technology research for Standard & Poor's Equity Group. "You can't really quantify these valuations. But I still think we're at the beginning of something big."

Staff researcher Richard Drezen contributed to this report.

CAPTION: NASDAQ'S NEW HIGH (This chart was not available)