Stock market's swoon weighs heavily on investors With US-Closing Stocks
NEW YORK, Jul 15, 2002 (AP WorldStream via COMTEX) -- Six triple-digit losses
on the Dow Jones industrials in the first two weeks of July. New five-year lows
on the Nasdaq composite and Standard & Poor's 500.
The stunning declines on Wall Street reflect a growing sense of despondency
among investors beleaguered by selloffs and mistrustful after months of
accounting scandals. They find no reason to buy stocks - not even a recovering
economy or improving corporate earnings can motivate them.
"Last week, I said several times, 'What would make anyone want to invest in the
market these days? They might as well go out and buy houses ... or gamble and go
to Las Vegas,"' said Steve Fletcher, 58, of Cleveland, who once hoped to retire
early.
"I can't really tell what's going on any more," he said. "For all I know, maybe
the Dow's going to fall to 6,000."
That sense of insecurity may be feeding the stock market's decline in a way it
didn't during downturns in the late 1980s and early '90s, and that in turn
intensifies the market's malaise.
A new study by the Pew Research Center suggests the stock market is having its
biggest influence in two decades on the way Americans view their own personal
financial prospects.
In large part, that's because a growing number of Americans are counting on
retirement funds or other investment accounts to fund their old age. Increased
media coverage of the markets is another factor.
"Through most of the 20 year period we looked at, there wasn't much of a link.
The Dow went up or down, and people didn't pay much attention," said Scott
Keeter, the center's associate director. "Starting since about 1998, people have
been paying more attention to the market as an indicator of what the economy is
going to do."
That kind of cycle can help drive a market up when optimism is strong but, right
now, investor confidence is at the lowest point many market observers and
financial planners say they can remember. After two years of steep losses, many
would-be buyers have simply lost faith that their investments will hold value -
let alone improve - anytime soon.
Even dramatic rebounds, like the one Monday in which bargain hunters pared down
what had been a 439-point Dow loss to a 45-point decline, aren't enough to
persuade buyers.
"Some people are calling up and telling us they want to go to cash, to go to the
sidelines," said Jeff Land, a Schwab investment consultant in Detroit. "That's
not our recommendation. But in this kind of a market, a lot of clients are
feeling panicked."
Accounting scandals at companies ranging from Enron to WorldCom have been blamed
for much of the selling. But analysts say the selloffs also reflect the fact
that investors, who had once hoped for a resumption of the bull market of the
'90s, are lowering their expectations.
Consensus is growing that many companies' profits will be anemic at best over
the next few years. That's because the economy appears to be improving slowly -
and some fear that the market's declines will make it even harder for companies
to turn a profit. As a result, the beginning of second-quarter reporting season
this week is being greeted with anxiety.
"Investors are scared. They're worried about the quality of the numbers," said
John Forelli, portfolio manager for Independence Investment LLC.
At the same time, the dollar is losing strength against foreign currencies -
making U.S. stocks less attractive to overseas investors whose enthusiasm for
the market has been an important force in its successes.
"A day doesn't go by without a foreign client wondering how to manage this,"
said Christopher Wolfe, equity market strategist for J.P. Morgan Private Bank,
who worries that the worst might not be over. "In the past, I would have been
able to believe that this might be what's called a selling climax ... but no
longer.
"The low 7,000 level on the Dow is absolutely within range right now, another
1,000 points of overshooting to the downside is not out of the realm of
possibility."
That prediction might not be as outlandish as it sounds. Nearly six years ago,
when Federal Reserve Chairman Alan Greenspan first expressed concern that
"irrational exuberance" was propelling the market too high, the Dow stood at
about 6,360. The S-and-P was at 735, fewer than 200 points below where it is
now, while the Nasdaq stood at 1,276, about 100 points below its current
position.
Greenspan is expected Tuesday to make his regular semiannual appearance before
the Senate Banking Committee. No doubt Wall Street will be listening carefully,
but for many investors it will take more than a few words to restore their
enthusiasm about investing.
"It really is scary. Intellectually, you do know it's a good time to be buying,
but it's hard to," said Cathy Patrick, 47, of Houston, who lost her job in the
energy industry five months ago. She's continued to reinvest the dividends in
stocks she already own, but hasn't done much else.
"You keep wondering if the economy might not be as good as we think it is, and
the market is going to keep falling," she said.
By LISA SINGHANIA
AP Business Writer
Copyright 2002 Associated Press, All rights reserved |
