Gst,
Btw
I'm just the messenger here...You know they always shoot the messenger...don't you?
>NEW YORK TIMES NEWS SERVICE
April 15, 2000
NEW YORK -- Investors fled the stock market yesterday in a sharp, almost panicked wave of selling -- triggering the biggest point losses ever on both the Nasdaq exchange and the Dow Jones industrial average.
And some fear the bloodshed isn't over yet.
The beleaguered Nasdaq index plunged nearly 10 percent to finish the worst week in its history with a 25.3 percent loss. The Dow Jones industrial average fell 5.66 percent and ended the week down 7.3 percent, its worst performance since 1989. Both indexes finished the day near their lows, a development that does not bode well for Monday.
The catalyst for yesterday's sell-off was a Department of Labor report that consumer prices had risen 0.7 percent in March, more than economists had predicted.
That news caused investors to dump technology stocks, deepening a rout that began in mid-March and has sent shares in many well-known technology companies down 30, 40, or even 50 percent in just three weeks.
But as the day wore on, the selling spread across the board. While technology stocks led the plunge, few companies escaped unscathed.
All 30 stocks in the Dow fell, while all but 16 stocks in the Standard & Poor's 500 index dropped. And only five of the 100 biggest companies in the Nasdaq index managed to finish up on the day.
"The market was levitating on hope and irrational concepts of stock market value, and now it's coming down to earth, but it's probably not down yet," said Byron Wien, U.S. investment strategist at Morgan Stanley Dean Witter.
This rout began March 28, when Goldman Sachs' chief investment strategist, Abby Joseph Cohen, warned that technology stocks were "no longer undervalued."
The selling deepened the next week after a federal judge ruled against Microsoft in its antitrust case with the government, a decision that seemed to finally pull the rug out from the technology sector. And while a lot of the so-called old economy stocks resisted at first, they have now been caught in the downdraft.
Traders and investors offered many rationales yesterday for the deepening skid, with the most common explanation involving overextended investors who have to sell stocks to pay off margin loans and tax bills, due Monday.
But underlying the explanations was a deepening sense of worry that this sell-off will not follow the pattern of previous years, in which nearly any slide was followed by an immediate and strong bounce.
Many of the investors who were most enthusiastic about high-flying technology stocks have no spare cash left to invest. More conservative investors are not yet ready to buy technology issues, many of which remain quite expensive by historical standards, with price-earnings ratios of 100 or higher despite their recent slide.
The sell-off has already proved painful for many investors. During the past week, U.S. investors have lost more than $2 trillion, or $7,000 on average for each person in the United States, according to Tony Crescenzi, chief bond market strategist at Miller Tabak & Co., a bond dealer.
Many market observers believe yesterday's sell-off will spill over to Monday.
"Normally if you have a really bad Friday, it carries over into Monday," said Phillip Larkins, market strategist at Legacy South, an Atlanta-based money management firm.
"A weekend of worrying doesn't lend itself to a vigorous uptick on Monday," he added. "My concern is the psychology of the market may be changing. There have been so many investors who have not been through a bad market."
Meanwhile, short-sellers, who make money on market declines and have been battered over the past several years by what they see as the irrationality of many technology investors, said yesterday's action vindicated their long-held views that many stocks were overvalued.
"The lesson is going to be the market is not a game, the market is not a casino, it's a serious thing for serious people, and if you're wrong, be prepared to lose," said Marc Cohodes, general partner of Rocker Partners, a hedge fund that has both long and short positions. "There are some people who are broke, and they only have themselves to blame."
There are signs in stock mutual fund data that fresh money is still flowing nicely into stock funds and that those who have sold technology stock have bought stock in other companies, rather than abandoning the stock market.
But many would-be buyers yesterday seemed content to wait for shares to fall even further, rather than jumping in as they often have when a market plunge made companies look cheap.
Jim Welch, who stopped by a Charles Schwab branch in midtown Manhattan about 1 p.m. to check his account, said he thought technology stocks were still too expensive. Welch, a 64-year-old stock market veteran who characterized himself as a value investor, said he might step in to buy technology shares if the sell-off continued "for a month or two."
On the positive side, the outlook for the economy, despite a surge in inflation last month, is still good. And if a decline in the stock market helps dampen the hot pace of consumer spending, the Fed may be able to get the economic slowdown it has been gunning for since last June.
But in Washington, government officials played down the effects of the plunge, saying there were no signs that it had put any major strains on the financial system.
The Securities and Exchange Commission said in a statement that "clearing systems and the markets are successfully dealing with processing orders and distributing price information." The Federal Reserve Bank of New York reported no major problems among securities firms.
Treasury Secretary Lawrence Summers told CNN that the government was "watching developments in markets as we always do," but that the important thing was that the economy remained fundamentally strong. President Clinton, traveling in Atlanta, was briefed on the situation by his aides, but he made no public statement.
Government officials said there had been no need to convene the working group of top financial officials that coordinates a response in the event of a market crisis. That group includes Summers, Alan Greenspan, the Federal Reserve chairman, and Arthur Levitt, the chairman of the SEC.
With its 355.49 point decline to 3321.29, the Nasdaq fell 9.67 percent yesterday, its second worst daily decline in percentage terms. The technology-heavy index is now down 34.2 percent, or 1,727 points, since its record high of March 10.
That is well into bear market territory, which is considered a decline of at least 20 percent from the most recent record high. And it is just short of the 35.9 percent decline, peak to trough, in 1987.
The Dow Jones industrial average, which fell 617.78, or 5.66 percent, to 10,305.77, is now off 8.7 percent from its recent high.
The Standard & Poor's 500 index, meanwhile, finished the day down 83.95 points, or 5.83 percent, at 1,356.56, and is now down 11.2 percent from its record high on March 24. |
