i infer that IBD sees more downside potential. from tomorrow's paper:
investors.com
The Big Picture
Wednesday, December 20, 2000
Stocks Stumble Badly
Despite Fed's Move
Investor's Business Daily
A budding advance grew into an ugly sell-off Tuesday after the Fed’s meeting produced no early Christmas present.
The government’s chief monetary arm switched to an easing bias on interest rates. Wall Street expected that. What it may really have wanted was an immediate rate cut, but that didn’t come. Instead, policy-makers painted a grim economic picture.
In November, the Fed fretted about the tight labor market and rising inflation risks. Those concerns were absent in Tuesday’s statement. "The drag on demand and profits from rising energy costs, as well as eroding consumer confidence, reports of substantial shortfalls in sales and earnings and stress in some segments of the financial markets suggest that economic growth may be slowing further," it said.
The major market averages were working on gains of 1% to 1.7% when the Fed’s statement hit the news wires at 2:16 p.m. Eastern time. Stocks stumbled briefly, rallied for about 15 minutes, then nose-dived toward the lows of the day.
The Nasdaq bore the brunt of the day’s damage, shedding 4.3%. It had been up as much as 2.7% intraday. The sell-off sent the index to a 16-month low and wiped out of all the gains from the rally that began Dec. 1.
The S&P 500, chock-full of big tech firms, slid 1.3% to hit a 52-week closing low. As noted Monday, the blue chip gauge has enjoyed support at the 1300 level over the past nine weeks. The Dow fell 0.6%. Cyclicals rallied to blunt the index’s decline.
Volume climbed more than 10% on both exchanges, a signal that institutions aren’t finished selling.
Anyone who has tried to guess the market’s bottom over the past seven months can tell you it’s a futile exercise. Rallies in late October and November came on tame volume and failed to prop the Nasdaq above its May lows. Investors have used every rally over the past three months as an opportunity to sell stocks.
The Nasdaq’s steep sell-off has certainly burned off much of the excessive gains seen from October last year to its March peak. But has it gone far enough? Among the components of the Nasdaq 100, 64 stocks still have a price-earnings ratio higher than 27, the average P-E of an S&P 500 stock. Another 18, including names such as Exodus Communications, Ariba and Abgenix, have no earnings.
Networkers, telecom gear, software and Internets all posted heavy declines. Ciena dropped 23 3/16, or 24%, to 73 3/16 and pierced its 200-day moving average on double average trade. The optical switch maker plans to buy Cyras Systems for $2.6 billion in stock. Brocade Communications lost 11% and Siebel Systems 19%, both on heavy trade.
Retailers also took a beating. Five retail subgroups, including department stores and retail-wholesale food, each fell 3% or more. Green Mountain Coffee, which blasted out of a base in October, tumbled 14 11/16, or 31%, to 32, its third straight decline in accelerating volume.
Dollar Tree Stores joined the earnings warning casualty list, plunging 15 15/16, or 44%, to 20 7/16 on huge volume. The retailer warned that fourth-quarter earnings would be 59-62 cents a share, below Wall Street’s 70-cent estimate.
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