Nasdaq Tumbles 4% to Lowest Level Since October ’99
Investors hoping for a market-related reason to give thanks didn’t get one Wednesday, as stocks again careened lower.
But some analysts say the price declines in the Nasdaq market, in particular, have become so vicious that a short-term rally must be on the horizon--somewhere.
The tech-dominated Nasdaq composite index plunged 116.11 points, or 4%, to 2,755.34 on Wednesday, closing at its low for the day and its worst level since Oct. 19, 1999.
Nasdaq has slumped 17.3% since Nov. 1 and is down 45% from its all-time high in March--by far the worst decline since 1973-74.
The broad market also was hammered Wednesday in trading that was surprisingly active for the day before a holiday.
The Dow industrials slid 95.18 points, or 0.9%, to 10,399.32, and the Standard & Poor’s 500 index dropped 1.9% to a new 52-week low that left it down exactly 10% year to date.
Analysts said the long list of fundamental worries putting pressure on stocks since early September remains the market’s biggest overall problem. Among those worries: the slowing economy; weakening corporate earnings growth, especially in the tech sector; and credit-tightening moves by many banks.
But the battle for the White House also is affecting the market mood, traders say.
That was evident Wednesday: Stocks rallied sharply at mid-session, when Florida’s Miami-Dade County said it halted its manual vote recount--a move that would seem to favor Republican candidate George W. Bush.
But the rally quickly gave way to fresh selling, a sign many investors are looking to bail out at the first sign of market strength.
Wednesday’s market was “absolutely politically related,” said Barry Hyman, chief investment strategist for Weatherly Securities.
“In the short run, emotions drive the stock market, and right now fear has the upper hand,” said Alan Skrainka, strategist for brokerage Edward Jones of St. Louis.
Still, he said, “Politics are a factor, but they aren’t the key reason stocks are dropping. The main concern is the slowdown of the economy and the slowdown of corporate earnings and problems in the technology sector.”
Concern that a slowing economy would cut profit growth even hit stalwart General Electric, which sank $2.19 to $48.56 on Wednesday.
Rumors about a GE earnings warning were called “outrageous” by GE, which said it remains “very comfortable” with analysts’ fourth-quarter estimates.
Credit Suisse First Boston analyst Michael Regan said GE’s business is robust, and the company isn’t likely to disappoint investors.
But earnings reported this week by a number of software companies did indeed disappoint investors, leading to deep declines in those shares Wednesday.
Apart from the software sector, major tech losers included Sun Microsystems, down $5.13 to $80, lowest since May; chip maker Broadcom, down $15.13 to $111.13, lowest since December; and Yahoo, down $3.50 to $38.19, lowest in two years.
Some traders suspect that the recent heavy selling of many tech stocks formerly wildly popular with individual investors is related to year-end tax tactics: Small investors who have large losses in the stocks may be selling to record those losses for tax purposes, to offset realized gains in other stocks.
Stock sales by individuals may have translated into a boost in money-market mutual fund assets in recent days. The Investment Company Institute, the funds’ chief trade group, said assets of retail money funds jumped $11.2 billion to $1.02 trillion in the seven days ended Tuesday.
Thomas McManus, investment strategist at Banc of America Securities, said the jump in money fund assets was the largest since early April. “The buildup in retail cash levels confirms our hunch that individual investors are beginning to throw in the towel with regard to the stock market,” he said.
Whether such selling by individuals, tax-related or otherwise, is largely just beginning or is closer to an end isn’t known, of course.
Still, some analysts say the Nasdaq market is so “oversold”--a technical term describing a market that has fallen too far, too fast--that a rally should be imminent.
Ricky Harrington, veteran analyst at Wachovia Securities in Charlotte, N.C., said he would “not be surprised to see Nasdaq rally 200 to 300 points” in the next few sessions, perhaps starting as early as Friday’s half-day session. “I think the buyers are a lot smarter than the sellers here,” he said.
Even so, he said that he sees only a short-term rally at best--and lower lows for Nasdaq in 2001, as the tech-stock bubble of 2000 continues to deflate.
Meanwhile, what was bad for stocks was good for long-term Treasury bonds Wednesday: A “flight to quality” helped push yields lower, driving the five-year T-note yield to a new 52-week low of 5.6%.
“If this [election] stalemate continues, it will cause erosion in confidence that won’t be good for the economy or the stock market,” said John Waterman, managing director of stock and bond accounts at Rittenhouse Financial Services in Radnor, Pa. “It may be good for [government] bonds, for a flight to quality.”
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Market Roundup: C6
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Foreign Versus U.S. Markets
Unlike their American counterparts, investors in some parts of the globe have been enjoying robust returns from their local bourses. But some foreign markets have performed even worse than those in the U.S.--although the downtrodden Nasdaq is very nearly a world beater on that score. China leads the list of winners, propelled by an improving economy and hopes for normalized trade relations. Neighboring South Korea heads the list of losers, weighed down by political turmoil and a regional economic slowdown.
(Market changes are measured in local currencies, reflecting what native investors are feeling.)
Major Winners
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Wed. Wed. pctg. YTD pctg. Country (index) close change change China (Shanghai A) 2,238.21 +0.72% +54.5% Ukraine (PFTS) 53.29 +0.15 +36.4 Jamaica (Stock exchange) 29,341.41 +0.55 +34.0 Costa Rica (BCT) 10,476.63 +0.22 +28.3 Denmark (Copenhagen) 927.36 --2.19 +19.7 Zimbabwe (Industrial) 17,139.09 --0.28 +18.8 Ireland (Irish overall) 5,782.02 --1.61 +15.2
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Major Losers
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Wed. Wed. pctg. YTD pctg. Country (index) close change change South Korea (Composite) 522.33 --1.72 --49.5% Taiwan (TSE weighted) 5,130.61 +0.54 --42.6 Egypt (Hermes) 8,002.23 --4.57 --38.6 Peru (Lima general) 1,213.00 --0.22 --33.9 Colombia (Bogota-Bolsa) 706.33 +0.37 --29.2 Spain (IBEX-35) 9,252.50 --3.56 --20.5 Iceland (ICEX-15) 1,361.71 --0.99 --15.9 U.S. (Nasdaq compos.) 2,755.34 --4.04 -- 32.3 U.S. (S&P; 500) 1,322.36 --1.85 -- 10.0
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Source: Bloomberg News
Lower and Lower
The Nasdaq composite index tumbled below the 2,800 mark Wednesday to its lowest level since Oct. 19, 1999. The year-to-date loss: 32.3%
Wednesday: 2,755.34 down 116.11
Source: Bloomberg News
