Dow Is Off to Its Worst Start Since 1920 as Investors Focus on Technology
By Philip Boroff
Dow Gets Off to Worst Start in 8 Decades: U.S. Stocks Outlook
New York, Feb. 11 (Bloomberg) -- The Dow Jones Industrial Average is off to its worst start in eight decades.
The Dow has tumbled 9.3 percent this year, its biggest decline in a comparable period since 1920, as investors eschew many of the industrial companies in the average in favor of faster-growing computer and telecommunications shares.
Rising interest rates and the prospect that the economy could slow after a record expansion have helped pull down 25 out of the 30 members in the Dow so far this year, investors said. ``People have just walked away from many of these companies,' said Robert Begun, a money manager at Orbitex Management in New York, which oversees $600 million.
Not since 1920's 15.5 percent decline through Feb. 11 has the Dow had such a dismal first six weeks. And this year the Dow's rout leaves it trailing the Standard & Poor's 500 5.6 percent decline. The Nasdaq Composite Index, more than four fifths of which are computer and technology companies, has risen 8 percent in 2000.
Honeywell International Inc., which reported lower-than- expected sales in the fourth quarter, is the worst performing member of the Dow average, down 27 percent. International Paper Co. and United Technology Corp., Caterpillar Inc. and Du Pont Co. are down more than 20 percent.
Three of the five Dow stocks that have gained this year are computer-related. Intel Corp. is the best performer, up 29 percent, while Hewlett-Packard Corp. is up 6.5 percent and International Business Machines Corp., 6.9 percent. ``Short-term, the Dow has a headwind against it,' said Charles Carlson, manager of the $120 million Strong Dow 30 Value Fund, a mutual fund that invests exclusively in Dow stocks. ``Investors still want all things technology.'
Nasdaq Gains This Week
The Nasdaq Composite rose 3.6 percent this week, its
fourteenth gain in 16 weeks.
The Nasdaq 100, which tracks 100 of the largest companies in
the composite, Vitesse Semiconductor Corp., up 47 percent, was the
biggest gainer. Last month the largest manufacturer of non-silicon
telecommunications chips reported a 62 percent quarterly profit
rise.
The Standard & Poor's 500 Index lost 2.6 percent for the
week, with all 11 industry groups declining. Health care stocks
fell the most, down 7 percent, and utilities the least, off 0.3
percent.
The companies that were among the biggest decliners included
Nike Inc., dragged down 28 percent because of the threat that the
closure of sporting-goods stores would sap sales. Two insurers:
UnumProvident Corp. and Aetna Inc. fell 44.8 percent and 28
percent, respectively, as the companies reported disappointing
fourth-quarter earnings.
Spurred by hopes for fast growing earnings among technology
companies, WebMethods Inc. shares surged six-fold to 212 5/8 after
the Internet software maker's $143 million initial public
offering. That was the third largest gain for a U.S. company on
its first day of trading.
Shares of security software makers rose after computer
hackers disabled Web sites at Yahoo! Inc., E*Trade Group Inc. and
others, raising concerns other sites were vulnerable. Check Point
Software Technologies Ltd. rose as much as 29 percent for the
week, before closing the week up 23 percent.
Economic Data
Next week investors will focus on government economic reports
including housing starts on Wednesday, wholesale prices on
Thursday and consumer prices on Friday for signs of fast growth
that could nudge interest rates higher.
Federal Reserve Bank of New York President William McDonough
is scheduled to speak Wednesday at a symposium sponsored by the
Bond Market Association at the New York Fed.
The Fed funds futures contracts indicate that investors
expect a quarter-point increase when the central bank's policy's
setting committee meets next March 21.
While most companies have reported quarterly results,
Columbia/Healthcare Corp., the largest hospital operator, is
slated to announce earnings Monday. Wal-Mart Stores Inc. and
Applied Materials Inc., the largest world's largest retailer and
semiconductor equipment maker, respectively, are scheduled to
report on Tuesday.
The most closely watched IPO will be Chordiant Software,
which sells products that lets companies offer personalized
marketing, sales and customer support by computer. |
