Well, the market just lost 1.4 trillion dollars this week in market capitalization. Is that enough yet? Only the DOW stopped a few points short of suffering the worst drop in the history of the market.
Like you I am seeing extreme value in some stocks, but given the nature of this wash out a lot of stocks will probably also not be coming back and I mean ever as they will have missed their window of opportunity.
I was talking to my broker and one of his clients works for a carrier. As an antedotal point, his client was saying the carrier was make lots of money, but was not showing a profit due to the strategy of increasing operations by acquisition as their competition went out of business. In the current environment, business are concentrating on cost, so most of the demand is for legacy services. They also got a lot of used equipment in the warehouse that they bought on pennies on the dollar and they are re-deploying that. It is only when a customer needs the newer broadband services and quality of services are they deploying new equipment. Not good for the equipment suppliers like JNPR, TLAB, FIBR, ONIS, CIEN, NT, LU etc ....
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NEW YORK (Reuters) - Stocks fell sharply on Friday, closing a week without equal in the market's 210-year history as blue chips suffered the largest drop since the Depression in the 1930s on increasing fears over an extended war on terrorism and further erosion of the nation's wobbling economy.
It was also the most active week ever in the wake of last week's terror attack that destroyed the World Trade Center's twin towers in New York's financial district and severely damaged the Pentagon outside of Washington.
Thousands of victims remain under mountains of rubble just blocks from the New York and American stock exchanges.
Investors dumped shares for the fifth straight day after President Bush prepared the nation for war on Thursday night. Wall Street has been jittery about the possible U.S. military response to the attacks.
The Dow Jones industrial average (INDEX:INDU) fell 140.40 points, or 1.68 percent, at 8,235.81, according to the latest data, while the Nasdaq composite (INDEX:COMPX) fell 47.74 points, or 3.25 percent, to 1,423.19. The benchmark Standard & Poor's 500 (INDEX:INX) dropped 18.74 points, or 1.9 percent, to 965.80.
"Right now, there are just falling knives everywhere," said Dirk van Dijk, who helps manage $4.5 billion for the C.H Dean & Associates. "Who the hell wants to step in front of a freight train? On Monday we did some buying. Clearly we were immature."
For the week, the Dow fell 14.3 percent, Nasdaq lost 16.1 percent, and S&P 500 tumbled 11.6 percent. Investors remained vexed, as the terror attack sparked national mourning, massive layoffs, recession fears and plans for U.S. retaliation. U.S. treasures and gold climbed as investors fled to safe havens.
General Electric offered a short-lived respite from the relentless selling, after the conglomerate said it was on track to deliver double-digit earnings growth this year.
The blue-chip Dow, which has lost nearly 1,370 points this week, briefly surged into the positive ground but sagged within minutes. GE finished up 93 cents at $31.30.
"You can't get a historical parallel. We are boxing with a ghost," said Richard Cripps, chief market strategist at Legg Mason Wood Walker. "The market is oversold, but there is always an intangible factor to stock prices and an irrationality that they can reflect. You have to let it run its course."
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Putting Money Where Your Mouth Is
Dave Hunter, chief market strategist at Kelly & Christensen, a small brokerage firm on the floor of the New York Stock Exchange, has long viewed the Fed as being behind the curve, recently suggesting its "misguided policy had us heading into the worst economic downturn this country has experienced since the 1930s."
But the record amount of liquidity the Fed has injected into the system in the past week "is as close to a guarantee as you can get in this business that a big upside move is just around the corner," Hunter commented today. "I do think Greenspan and O'Neill could have shown more of a sense of urgency to show the markets they get it. Fortunately though, unlike the reassurances Greenspan has offered throughout the past year, this one is backed up by an unprecedented amount of new money into the system [which is] much more important than jawboning."
The ever-elusive bottom is rapidly approaching, the strategist said, suggesting today's losses were an expression of the market's "need to finish discounting the bearish view and all the fallout from last week."
Because this "final selloff phase is a vertical decline" it's impossible to determine when the actual bottom arrives until after the fact, he continued. But "because of the massive liquidity injection, the market will have a V-recovery mirroring the decline. So if you buy ahead of the bottom by a few days, you'll recoup any losses very quickly."
Of course, that assumes investors were able to avoid the losses this week, much less in the past 18 months, and have cash on hand to buy.
Still, one could argue that elements of a bottom were evident today in the reportedly forced selling of 135 million shares of Disney (DIS:NYSE - news - commentary - research) by the Bass family, in conjunction with the market's downturn amid frightful market internals.
The more the market falls, the steeper any reflexive rally is likely to be. But those contemplating a V-shaped recovery should consider the following: In the four days since trading resumed, the Dow has fallen 1229.23 points, or 12.8%, while the S&P has lost 108.05, or 9.9%, and the Nasdaq 224.45, or 13.2%.
Given that a fairly substantial advance is necessary just to get back to the pre-Sept. 11 levels, a W-formation -- where the first rally attempt is met by another downturn -- is looking more and more likely.
thestreet.com |
