To all - sort of O.T. - some hard numbers on current stock mkt decline.
August 25, 1998
Stock Decline Deeper Than Realized
A.P. INDEXES: TOP STORIES | NEWS | SPORTS | BUSINESS | TECHNOLOGY | ENTERTAINMENT
Filed at 8:04 a.m. EDT
By The Associated Press
NEW YORK (AP) -- The recent selloff in corporate shares already has pared
37 percent from the average stock's 52-week high, a brokerage firm study
shows.
The analysis, by Donaldson, Lufkin & Jenrette, depicts a vastly more serious
and broader picture than portrayed by the popular indexes of large-company
stocks, which show a decline of about 10 percent.
From another perspective, it could be interpreted as suggesting the market
decline has already approached its low point and may be closer to recovery
than originally believed.
DLJ said its findings, based on data from Factset Data Systems, confirms the
view that ''outside the very largest firms, a bear market has taken hold,'' and
that it approached in size the 1987 price collapse.
The 37 percent decline is based on an unweighted sample of share prices
from 6,625 New York Stock Exchange and Nasdaq companies through Aug.
21, all of which had market capitalizations of more than $1 billion.
While companies of that size are generally thought of as large, they are
dwarfed by those in the 30 companies in the Dow Jones industrial average
and the 500 in the most popular Standard & Poor's index.
Both these indicators are also market capitalization-weighted, meaning their
share prices are assigned values proportionate to overall market capitalization
rather than simply averaged out.
Mainly due to the large size of component companies, which have tended to
do far better than shares of smaller concerns, these popular indicators have
portrayed a market decline of only 10 percent or so.
Of 6,580 companies examined in the DLJ study, 6,107, or 93 percent, had
fallen at least 10 percent, and 1,784, a quarter of the total, had declined at
least 50 percent on the basis of Aug. 21 closing prices.
A similar analysis of 2,335 companies involved in the 1987 stock market
plunge showed an average decline of 44 percent from the market peak on
August 26 of that year to the trough on December 4.
Dominating the fallen group were technology and energy shares, and ADRs,
or American-owned shares of foreign companies, although declines were
spread throughout the list.
The results were said to have surprised researchers at DLJ, which has been
more confident than some firms about a market recovery. It still holds to that
view.
In its ''Portfolio Manager's Weekly,'' it observes that in view of such a
broad-based deterioration ''a bottom point may be at hand.''
Thomas Galvin, the chief investment officer, said in his report that ''while
very concerned about the Pacific Rim implosion, we do not envision a U.S.
recession or a spike in interest rates.''
In fact, he suggested that the bear market should be relatively short-lived, and
that positive economic data and profits ''should restore investor confidence
during the next three to six months.''
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