Friday, October 9, 1998
Nasdaq's roller coaster ride sends investors fleeing to safety of bonds
BY WILLIAM HANLEY
The Financial Post
The big-name technology stocks took Nasdaq investors on a gut-wrenching
ride yesterday that at one point had the composite index on the verge of
crashing and burning only to escape the session well above the day's
lows.
In yet another tumultuous day in the stock markets, the Nasdaq index
closed down 43.49 points, or 3%, at 1419.12 a near miraculous recovery
from an intraday deficit of 119 points, or 8.1%. Nasdaq is off 9.6% this
year and off almost 30% from the record closing high of 2014.25 on July
21.
The Dow Jones industrial average also recovered from a big loss to end
down only narrowly and the broader Standard & Poor's 500 stock index
also regained much lost ground to close with a loss of 1.2%.
But all eyes were on Nasdaq and specifically star techs Dell Computer
Corp., Microsoft Corp., Intel Corp. and Cisco Systems Corp., which shed
tens of billions of dollars of market capitalization on huge trading
volumes, then roared back to trim losses and, in Cisco's case, end up on
the day.
Nereo Piticco, president of PCJ Investment Counsel in Toronto, said the
big technology names were the stocks that led the market higher on
growth expectations over the past few years. With world growth
projections downgraded in the face of the financial crisis, investors
decided these stocks could no longer support such high prices and
expectations.
"In some of these cases, [the tech stocks] are where the profits are,
and people are taking the profits wherever they can find them," said
Arun Kumar, senior U.S. equities strategist at Lehman Brothers Inc. in
New York.
Jim Mountain, co-head of institutional equity at Scotia Capital Markets
in Toronto, noted if investors had not held the big four Nasdaq techs
over the past four years, they would not have matched the Nasdaq index's
remarkable gains.
Yesterday, Dell Computer (DELL/NASDAQ) closed off US$2 1/8 at US$48
7/16 on volume of 102.7 million shares after earlier hitting a low of
US$40 3/4. Microsoft (MSFT/NASDAQ) eased US$2 15/16 to US$91 3/16 after
hitting an intraday low of US$87. Intel (INTC/NASDAQ) closed off 5/8 at
US$78 7/16 after being down at US$75 13/16. And Cisco Systems
(CSCO/NASDAQ) finished US$2 13/16 higher at US$46 11/16, when earlier it
hit US$41 1/8.
Gerald Vincent, portfolio manager at investment counsel Davis-Rea Ltd.
in Toronto, saw the big comeback as a positive sign, saying the earlier
decline was "exhausted selling" that showed investors had capitulated.
That suggests the major selling may be over and the later comeback is a
sign the market could be stabilizing.
"It was a significant battle between the bears and the bulls," he said,
adding the bulls have been largely absent from the market in recent
weeks.
"It shows buyers are coming in at certain price levels," and that is
positive.
Mountain said the selloff in technology stocks betrayed a certain
flight to the high-dividend, steady earnings issues such as Philip
Morris Cos., which reached a 52-week high this week.
"Value investors are finding there's something to buy in the market."
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