Investors Flee to Safety in Market Frenzy

Treasury bonds, drug stocks, utility stocks and that old standby, gold, were among the few sources of shelter Wednesday for shellshocked investors, who once again were vexed by corporate profit concerns.

“Earnings worries are going to be center stage” for the foreseeable future, said Francis Gannon of SunAmerica Asset Management, who said technology stocks will be anathema to investors until further notice.

Others, however, said the market’s tech wreck may be worsening now only because investors are doing the last of year-end tax-related selling, dumping losers to record tax losses. That selling could clear the way for a bounce by next week or after Jan. 1, some say.

The tech-laden Nasdaq dropped 178.93 points, or 7.1%, to 2,332.78 on Wednesday, its seventh-largest one-day loss and lowest close since March 23, 1999.

The index, which has fallen in seven consecutive sessions, has declined 43% this year and 54% from its March 10 record.

The Standard & Poor’s 500 fell 40.86 points, or 3.1%, to 1,264.74, its lowest since October 1999. The index is on track to finish the year without a tech stock among its three-largest members for the first time since 1996--a sign of how much computer-related shares have fallen out of favor with investors.

The Dow Jones industrials lost 265.44 points, or 2.5%, to 10,318.93. The Dow is now off 10.3% year-to-date, the S&P;, 13.9%

On Nasdaq, losers swamped gainers by a margin of almost 4-1 on volume of 2.8 billion shares, the second-heaviest ever. All but one of the 25 most-active U.S. stocks fell. Almost two stocks fell for every one that rose amid very heavy trading on the New York Stock Exchange.

The carnage in the market sent investors fleeing for low-risk debt. Treasury securities surged and high-grade corporate bonds followed suit.

“It’s a mess out there, so there’s some flight to safety,” said Michael Maurer, debt strategist at A.G. Edwards & Sons.

Soaring Treasuries prices sent their yields falling to the lowest levels in nearly two years. The rally also suggests that market players believe the Federal Reserve, which held interest rates steady Tuesday, will follow by cutting rates soon.

The yield on the benchmark 10-year Treasury note plunged to 5.03% from Tuesday’s close of 5.18%, while the yield on the one-year T-bill closed at 5.49%, down from 5.59% Tuesday.

Some of the tech sector’s leaders were among the hardest-hit shares Wednesday. Cisco Systems, the biggest maker of computer networking equipment, fell $5.25, or 12.3%, to $36.50, dropping to its lowest level in more than a year. Cisco had the fifth-busiest day ever for a U.S. stock, with almost 170 million shares trading.

Some money managers tried to find a ray of hope.

“So many people were expecting a year-end rally instead of this falling off the cliff,” said Kenneth Corba, senior manager of the PIMCO Growth fund. “Some of those people may be, in a sense, throwing in the towel, which could be a positive. We needed to blow out the “dot-com” billionaires and the overheated IPO market because there was still too much fluff. This feels like it could be the last blow-off.”

Others say there are still too few signs of real concern on the part of investors. “Where are the surveys showing a sentiment of fear?” Todd Salamone, director of research at Schaeffer’s Investment Research in Cincinnati, asked rhetorically.

What’s more, the weakening-profit concerns dogging the tech sector also extend to the rest of the market, analysts note.

Even so, investors looking for safe haven are finding some places to go. The Amex drug stock index advanced for a third day, rising 0.7% as 11 of its 15 members gained. Merck rose $1.88 to $93.38, Bristol-Myers Squibb advanced $1.50 to $72.56 and Pharmacia climbed $1.94 to $59.94.

The Dow Jones utilities average rose 1.6% to just below its Oct. 2 all-time high. Southern Co. advanced $1.69 to $32.81, Public Service Enterprise Group climbed $2.25 to $48.31 and American Electric Power gained $2.06 to $46.75.

The Amex gold stock index rose 6.9% as near-term gold futures gained $2.80 to $272.50 an ounce. Homestake Mining rose 63 cents to $4.94 and Newmont Mining gained $1.50 to $18.19.

Market Roundup, C9-10