Method 1 has 5000 operations, each of which is bound to generate some error. Your machine epsilon may vary from mine, but mine is 2.2204 e-16 on a 64 bit installation of Matlab. (Type "eps" on your command line) Every Matlab operation is rounded to the nearest eps, so if you have 5000 operations, that is 5000 opportunities to accumulate error.
If you are extraordinarily unlucky, and each of those rounding errors went in the same direction, you might see as much as 5.5511e-13 in error accumulation. (max error = 5000*eps/2). So in reality, your accumulation of 8.88e-15 in error over 5000 operations is really not all that bad, as the errors seem to be distributed near the desired mean of zero. If your system is sensitive to that level of error, I would suggest you reconsider the reasons why you "must" use method one.