A New Blow to Wall Street
The blowout Thursday on Wall Street may have some investors wondering whether the stock market has finally hit bottom.
After all, even though the Nasdaq composite ended the day with a 109-point loss, it snapped back sharply from the lowest levels of the day, when the technology-heavy index was off exactly 50% from its March 10 peak.
But many traders, having watched the market struggle painfully in recent months, were unconvinced that Thursday’s late rebound was significant.
Peter Van der May, trading chief at Arnhold & S. Bleichroeder in New York, called the comeback a “technical bounce” that could extend into today’s trading but doesn’t portend a sustained rally.
Nothing fundamental has changed in the market or the economy that would signal a rosier outlook for stocks, he said. Many other analysts agreed.
“People have stopped looking for the bottom and are looking for an exit,” said John Manley, chief equity strategist at Salomon Smith Barney.
There was little in the closing numbers Thursday to dispel such views. The Nasdaq closed down 109.00 points, or 4.0%, at 2,597.93. At 2.7 billion shares, volume was the second-highest in Nasdaq history. Losers outnumbered winners by a margin of more than 2-1, and 853 Nasdaq issues hit new 52-week lows.
Nasdaq, which has fallen in nine of the last 10 sessions, now is trading at its lowest levels since early-August 1999. The index fell 23% in November--its worst month since October 1987.
The Dow Jones industrial average, meanwhile, closed down 214.62 points, or 2%, at 10,414.49, after falling more than 335 points in afternoon trading.
The broader Standard & Poor’s 500 index fell 26.96 points, or 2%, to 1,314.95.
Trading on the New York Stock Exchange set a record, at 1.54 billion shares. Losers led gainers 18-10.
Now down 36.2% year-to-date, Nasdaq is on pace for the worst annual performance in its 29-year history, surpassing 1974’s 35% decline. In fact, it is faring much worse than its “old-economy” brethren. The Dow is off 9.4% year-to-date, while the S&P; 500 has fallen 10.5%.
Still, most broad market indexes have deteriorated in recent weeks with Nasdaq. The S&P; mid-cap stock index, one of the strongest indexes since spring, has slumped 9.3% since Nov. 2.
Thursday’s downdraft was directly related to Gateway’s announcement late Wednesday that its sales were weaker than expected. The market’s worries were compounded by new data showing the economy is slowing markedly.
Gateway fell $10.50 from Wednesday’s close to $19 on the NYSE, giving it a loss of nearly 39% over two days. The stock, which a year ago was trading at more than $80 a share, also was downgraded by several analysts.
The sell-off quickly spread to other computer-related stocks on concerns that Gateway’s warning reflected industrywide problems. Dell Computer fell $2.56 to $19.25; Apple slid $1.06 to $16.50.
Chip makers, which supply the PC industry, also dropped, led by Intel, down $4.69 at $38.06. Software maker Microsoft was down $7.69 at $57.38. Intel and Microsoft are Dow components, and their declines helped pull the blue-chip index lower.
Dan Niles of Lehman Bros. a top tech industry analyst, lowered his rating on Intel and five computer stocks. As economies around the world slow, demand for PCs “is getting worse,” Niles wrote.
But it wasn’t just new-economy stocks that suffered. The Philadelphia oil services index fell 6.1% and the Amex natural gas index was off 4.7%. Brokerage stocks tumbled as investors reacted to concerns that a protracted market slowdown would hurt their business.
Retailers’ stocks dropped on concern that the slowing economy will cut sales during the crucial holiday selling season. Even drug stocks, stars of recent months, were mostly lower.
On the plus side, gold mining stocks rose. The Philadelphia gold and silver index was up almost 2.0%, its sixth gain in the last eight trading sessions, although it’s still down 30.7% year-to-date.
Goldman, Sachs & Co. investment strategist Abby Joseph Cohen, one of Wall Street’s most prominent bulls, told investors Thursday that the amount of cash sitting on the sidelines in mutual funds, combined with “attractive valuation, sets the stage for higher share prices.”
Goldman analysts see no evidence of “particularly weak conditions” in most tech industries, Cohen wrote, despite a PC sales slowdown.
But even Cohen’s power to turn this market around may be limited. She also argued in mid-October that blue-chip stocks were at attractive valuations, but prices have gone lower since.
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Bloomberg News, Associated Press and Reuters were used in compiling this report.
* BEYOND WALL STREET?
The market’s losses fuel fears that a full-blown recession is coming. A1
* MORE SIGNS OF A SLOWDOWN
Consumer spending barely budges and jobless claims rise. C3
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Stocks: The Sell-Off Deepens
The technology-dominated Nasdaq composite has suffered by far the worst decline of major stock indexes this year, but losses of most broad indexes have deepened in recent weeks amid concerns about the economy. A look at key indexes’ declines from their 2000 peaks, and their year-to-date changes, through Thursday:
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Bonds: A Rush Into Safe Havens
Investors have poured into Treasury securities in recent days, sending yields on the bonds down sharply. The “flight to quality” reflects fears over the economy and a growing belief that the Federal Reserve will cut interest rates in 2001, experts say.
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Mutual Funds: Many Giants Hold Up Well
Investors who have money in the largest stock mutual funds may not be feeling the pain of the losses in major stock indexes: Many large funds are “value”-oriented, and many value stocks have held up well this year while tech shares have collapsed. Here are year-to-date total returns for the largest domestic funds, ranked by assets:
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Assets YTD Fund (billions) return Vanguard 500 Index $104.4 -9.5% Fidelity Magellan 101.6 -10.0 Investment Co. of America 56.6 -0.2 Washington Mutual 46.8 +3.1 Janus Fund 46.5 -13.9 Fidelity Contrafund 42.4 -9.9 Fidelity Growth & Income 42.0 -2.8 Growth Fund of America 39.4 +5.1 Amer. Century Ultra 38.6 -20.6 Fidelity Growth Co. $34.3 -10.3% Janus Twenty 31.0 -27.9 Fidelity Blue Chip Growth 29.7 -10.3 PIMCO Total Return 28.2 +9.4 Putnam Voyager 24.2 -17.6 Vanguard Windsor II 24.1 +8.9 Vanguard Primecap 22.7 +1.0 Vanguard Wellington 22.6 +6.0 Fidelity Equity-Income 22.2 +4.2 Fidelity Puritan 21.3 +4.1 Putnam Growth & Income 20.2 +3.9
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Sources: Bloomberg News, Reuters, Times research
