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Bear Attack: Stocks Fall to New Lows
By Lawrence Carrel
March 12, 2001
Market Monitor
DJIA 9840.22 -107.32
Nasdaq 1924.66 -47.60
Rus 2000 446.61 -6.27
3/28/2001 9:44 AM
CSCO 18.13 0.00 0.00%
JPM 43.36 1.25 2.97%
PFE 39.98 1.24 3.20%
PDG 8.71 -0.27 -3.01%
ERICY 6.72 0.00 0.00%
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THE BEARS marauded the stock market today and the results were grizzly.
Rising fears of a collapse in corporate profits caused an evaporation of buying, leaving sellers to bid prices lower and lower and sending the major indexes into some of the heaviest one-day losses since the current stock spiral began last year.
When it was over, the Standard & Poor's 500 index — the market's broadest measure of blue-chip stocks — was officially in a bear market, more than 20% off its last peak. Not to be outdone, the already mauled Nasdaq Composite fell into its worst bear market in history.
Despite the pain, some analysts said the market still hasn't shown all the classic signs of "capitulation" — the steep, rapid and irrational plunge that convinces everyone the worst is over.
For one thing, market volume today wasn't high enough, said Bill Meehan, chief market analyst at Cantor Fitzgerald.
"There's no reason to buy, but there's no selling panic either," said Meehan. Classic capitulation would be characterized by very heavy volume, punctuated by halts in trading of some stocks due to massive imbalances in sell orders, he said.
In addition, capitulation won't happen as long as investors cling to false hopes that earnings and stocks will recover sharply in the second half of the year, said Meehan.
The final scorecard showed the Nasdaq Composite Index down 129.40, or 6.3%, to close at 1923.38. That's its first close under 2000 in more than two years, and its lowest level since Nov. 19, 1998. The loss submerges the index more than 61% from its peak last March, beating out the 59.9% bear-market decline it suffered during the oil crisis and recession of 1973-74.
The S&P 500 sank 53.26 points, or 4.3%, to 1180.16. That's 22.7% off its peak of 1527.46 on March 24 and the first dive into bear-market territory since 1990, said David Blitzer, chairman of S&P's Index Committee.
The Dow Jones Industrial Average plummeted 436.37, or 4.1%, to 10208.25. With every Dow stock in the red, it posted its fifth-largest one-day point drop in history and its worst decline since the Internet bubble was bursting in April 2000.
There was no single trigger to today's sell-off, just a growing pile of profit warnings and analyst downgrades as the stalled economy eats away at corporate America's best-laid plans for business growth.
While tech stocks led the plunge, the pain was felt in virtually every sector. Banks were particularly frail. J.P. Morgan Chase (JPM) lost 7%. Economically sensitive "cyclical" stocks also were hit hard. Disney (DIS) lost 7%. Even defensive stocks that hold up best during hard times saw selling: Pfizer (PFE) lost 4%. Who gained? Only those stocks perceived as the safest of havens. Gold-mining company Placer Dome (PDG) rose 4%.
In the tech sector, data networkers were particularly hard hit. Cisco Systems (CSCO) dropped 9% to $18.81 — 77% off its high of $82 — after analysts slashed their earnings estimates and price targets for the leading Internet-infrastructure company. Cisco was one of several tech bellwethers to issue statements last week about its weak prospects, disclosing the first layoffs in its 17-year history. It followed the likes of Intel (INTC) and Yahoo (YHOO), which warned of weak revenue and profit prospects.
Salomon Smith Barney cut its profit projections and price targets on no less than a dozen networkers today, including Cisco, Nortel Networks (NT), Corning (GLW) and Ciena (CIEN), saying their troubles are spreading geographically. "Evidence is building that the fragile economic backdrop in Europe and Asia is starting to weaken due to rapid deterioration in the U.S. economy," wrote analyst B. Alexander Henderson. The only glimmer of hope he offered was that the news may not get much worse from here.
As if to confirm Henderson's fears, Swedish cell-phone company Ericsson (ERICY) said delayed and postponed orders will cause its first-quarter revenue to be flat or down compared to last year. It previously estimated a 15% gain. Now the company expects to post a loss instead of breaking even. Investors hung up on this one, short-circuiting its shares by 25%.
Bond prices gained today, sending yields down. The 10-year Treasury note yield fell to 4.89% from late Friday's 4.93%. The 30-year bond yielded 5.30% vs. 5.32% late Friday. |
