Wednesday, March 21, 2001
News of Rate Cut
Fails to Lift Stocks,
Blue Chips Tumble
By GREGORY ZUCKERMAN
THE WALL STREET JOURNAL
In the end, it wasn't enough.
After appearing to initially calm investors' frayed nerves, the Federal Reserve's decision to cut its short-term interest-rate target by a half percentage point disappointed the market and led to a late-day sell-off.
The wave of selling picked up sharply with unusually heavy volume coming during the last hour of trading in a troubling sign that the market may not yet have hit bottom, according to some traders.
The Nasdaq Composite Index finished the day 4.8% lower, or 93.74 points, at 1857.44, back below the 1900 mark and its lowest point in more than two years. Like many of the recent bad days, the selling wasn't confined to the technology stocks that dominate the Nasdaq. The Dow Jones Industrial Average fell 2.39%, or 238.35, to 9720.76. The Standard & Poor's 500-stock index fell 2.41% to 1142.62.
"The economy is slowing down and the bottom line is every piece of news is negative," said Kenneth M. Sheinberg, head of New York Stock Exchange trading at SG Cowen in New York. "Selling begot selling; it snowballed."
Robert McCooey, president of Griswold Co., a Big Board floor-brokerage firm, watching the mood worsen as the day wore on, said, "Markets are made up of a lot of psychology and it is all very, very negative."
Many investors had been hoping for a rebound, as interest-rate cuts usually have brought gain, not pain, for stock investors because lower borrowing costs often lead to an upturn for the economy.
But even after the third half-point rate cut this year -- one of the steepest reductions by the Fed -- many investors remained discouraged. Many had held out hopes for a three-quarter-point cut.
At the midtown-Manhattan office of brokerage firm Charles Schwab & Co. Tuesday afternoon, Alaina Bloom said she is putting new investment money into cash and money-market funds and is avoiding stocks. Wall Street's bulls say the sharp decline in stock prices make this a good time to buy.
But Ms. Bloom, who has seen the value of her portfolio drop by about half since last year's peak, said, "I know I should see it that way, [but] that's not how I look at it. I look at it like I lost a lot of money." |
