O.C. Stocks Have Their Worst Day in 5 Years

Sick of watching her investments stagnate while everybody else got rich, Newport Beach resident Jean Bradley last week dumped all her money into a mutual fund packed with high-tech companies. Bad timing.

On Friday, the stock market plummeted in a wave of panic selling, and Orange County stocks took their worst drubbing in more than five years.

“Everything I have is just in the garbage right now,” said Bradley, customer service representative at Newport Beach Chamber of Commerce. “I’m very depressed.”

And Bradley wasn’t the only Orange County resident feeling queasy from the rout.

“There is panic out there,” said Mark Stewart, with Stewart Securities in Newport Beach. “It doesn’t matter if the stocks are great companies or not--they’re just being sold. I call it musical shares. No one wants to be the last out.”

The sell-off hit local companies with a bang.

The Orange County Bloomberg Index, which tracks 132 local companies, slumped 34.35 points, or 11%, to 279.01, the biggest one-day loss in the index’s five-year history. The loss pushed the index to its lowest level in four months, meaning that local stocks generally have given back all of the hefty gains achieved during the first couple of months this year.

For the week, the index was off more than 23% as nine stocks lost more than half their value.

Although the technology sector absorbed the heaviest blows Friday, virtually all sectors hit the skids. In all, 110 stocks moved lower, while only 12 moved up and 10 were unchanged.

Data storage equipment maker Emulex Corp., one of last year’s brightest stars, saw its shares lose nearly half their value in one day, even though the Costa Mesa company on Thursday posted solid quarterly financial gains that exceeded analysts’ expectations.

Stockbrokers urged calm while economists began assessing what damage the plunging stock prices might do to the county’s thus-far robust economy.

The meltdown revived painful memories.

“The stress level among investors is as high as we’ve seen going back literally to the crash of ‘87,” said Robert Wolford, with Hollencrest Securities LLC, an asset management firm in Newport Beach, where several clients called Friday to liquidate their accounts.

“It’s like trying to paddle as fast as you can in a river that’s raging,” said Ray Tang, a Laguna Beach investment manager. “I feel very small up against the forces of nature here.”

Indeed, the county’s robust economy will feel the effect of the market downturn, said Anil Puri, Cal State Fullerton economist.

Luxury items, such as expensive homes and cars, would be the first to feel the pinch, he said, although it may not be for three to six months, Puri said.

A spending slowdown wouldn’t occur “until individual households realize their wealth positions have been affected significantly,” he said, noting that it’s too early to assess the damage.

Some Effects Are Almost Immediate

The belt-tightening was felt almost immediately in some areas. At Orange County Volvo in Santa Ana, two customers who had earlier picked out cars called Friday to bail out because of the tumbling stock market, sales manager Alex Pinos said.

A market slump could cool off Orange County’s housing market, which has sizzled despite rising mortgage rates and dwindling affordability--twin killers under normal circumstances.

The surging market had stoked home buyers’ confidence and provided many with ready funds to make a purchase. In the fourth quarter alone, one in five home buyers in Orange County tapped into the stock market to finance their purchases.

With stocks down, the pace of home sales and price increases should slow noticeably, said G.U. Krueger, an economist with the California Assn. of Realtors.

“I’m not prepared to say that overall home prices will fall in Orange County,” where the median single-family house sells for about $306,000, he said. “But until now our expectations of a slowing in home resales activity have been frustrated by the fact that the stock market was compensating for rates and prices going up and affordability going down.”

He noted, however, that a slumping stock market also could prompt some investors to move their funds into real estate--a factor that helped spur the huge run-up in home prices in California after the stock market crashed in late 1987, Krueger said.

Although local technology stocks took the worst beating, the sector remains fundamentally strong, said Radha Bhattacharya, associate professor of economics at Cal State Fullerton, adding that she does not expect the sell-off to have a long-term impact on the economy.

Tech giant Broadcom Corp., for one, still plans to continue its buying spree although the Irvine chip developer’s shares have lost more than half their value in recent weeks.

The market’s “healthy correction” could lower the purchase prices for some companies, said Chief Executive Henry T. Nicholas III.

Although Broadcom has used its stock to snap up eight companies in little over a year, the company also has a hefty supply of cash on hand, Nicholas said. “One of the things that makes our company particularly strong in a market like this is that we throw off lots of cash,” he said.

But the market slide could derail a merger between TriZetto Group Inc. and drug data giant IMS Health Inc. a proposed stock swap valued at $4.65 billion. TriZetto’s stock has lost nearly two-thirds of its value since the beginning of the year, and it was one of the big losers Friday.

Given TriZetto’s sinking shares, it would appear the deal is off.

“Both companies feel it’s in our best interest to work together, but we’re listening to the concerns of IMS and TriZetto shareholders,” said Jeffrey Margolis, chief executive of the Newport Beach-based online health services company. He declined to comment on the merger’s prospects.

Meanwhile, residents fretted over their nest eggs.

Lake Forest resident Lisa Mamo has funneled whatever she could into the stock market over the past 6 1/2 years, planning to finance her retirement with her blue chip stocks, investing more than $10,000.

“I’ve worked my butt off to put all that money in there, and it could be gone,” said Mamo, 36, a customer service representative for Federal Express. But she said she doesn’t intend to unload her shares. “I know in the long haul it will go back up, but this does worry me,” she said.

Irvine resident Herb Cohen said he’s also sitting tight, having seen the market surge and sink over the years.

“I’m not selling,” said the 55-year-old software developer and computer consultant. “In fact, this is the worst time to sell. Everything’s low.”

In fact, as the day progressed, more clients began calling Hollencrest Securities to seek advice on what stocks to buy on Monday, money manager Greg Pellizzon said.

“We’ll be spending most of the weekend creating a ‘buy list’ for them,” he said. But Tang, the investment manager in Laguna Beach, feared the worst was yet to come.

“Maybe Monday morning is the final bloodletting,” he said. “But my message to clients is: ‘Hold on. You do not want to sell into a market like this.’ ”

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Staff writer E. Scott Reckard contributed to this report.

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O.C. Stock Swoon

The Orange County Bloomberg Index, which measures the performance of major O.C. stocks, fell 34.35 points Friday, a record. Graph shows how the index has performed this year.