Nasdaq Hits 13-Month Low; Broadcom Shrugs Off Stock Plunge
The Nasdaq composite index tumbled to a new 13-month low Tuesday, as investors’ hopes for a turnaround in technology stocks continued to be dashed.
The broad market also fell, which traders blamed in part on the increasingly bitter battle for the White House.
The Nasdaq composite index plunged 145.51 points, or 5.1%, to 2,734.98, its seventh loss in eight sessions. The index now is at its lowest since Oct. 19, 1999.
The Dow Jones industrials lost 38.49 points, or 0.4%, to 10,507.58, as blue chip shares remained a refuge, relatively speaking, from the selling onslaught on Nasdaq.
Losers topped winners by nearly 3 to 1 on Nasdaq in active trading, and by 17 to 12 on the Big Board.
Weary traders had no shortage of alleged culprits to blame for Nasdaq’s woes. Fresh signs Tuesday that the economy is slowing raised new fears that the nation could fall into recession in 2001.
Vice President Al Gore’s apparent intention to dig in his heels in the fight for the presidency also is eroding market confidence, some traders said.
Still, most concede that politics are a minor problem for Wall Street. For tech stocks, the combination of slowing profit growth, still-high valuations and year-end tax-loss selling by individuals remains a deadly mix, experts say.
Personal-computer stocks fell after brokerage Salomon Smith Barney said consumer and business demand for PCs is weak and retailers have high inventories. Compaq slumped $1.71 to $23.10 and Dell Computer sank $2 to $22.44.
Many suppliers to the computer industry, including makers of semiconductors, network equipment and software, were dragged lower as well. Internet-related shares also fell sharply; Yahoo slid $3.16 to $36.97, a two-year low.
Many Wall Streeters have been hoping for a “blowoff” of panic selling and plummeting indexes that would mark the end of the brutal bear market for tech stocks.
As painful as that sell-off might be, such observers say, it would clear the way for a sustainable rebound. But Gregory Nie, technical analyst for First Union Securities in Chicago, said he is becoming more convinced that there won’t be a one-day climax to the Nasdaq malaise.
There is precedent for market bottoms being made over agonizingly long periods of time, he said, adding: “I think we’re going to have to crawl for a while before we recover.”
Yet some market bulls insist that there are more signs that a bottom may be near.
“Market bottoms come in one of two ways: climactic selling followed by a sharp reversal, or the water torture that we’re seeing now,” said Richard Eakle, president of Eakle Associates, a money management firm in Fair Haven, N.J.
“My gut feeling is that we’re scraping along close to completing a bottom.”
In a positive sign, the “four horsemen” of Nasdaq--Microsoft, Intel, Cisco Systems and Sun Microsystems--”are acting much better lately,” Eakle said.
Also, mutual fund cash levels are at a multiyear high, so there is cash on the sidelines to fuel any rally that gets started, he said.
Mark Keller, investment strategist at brokerage A.G. Edwards & Sons in St. Louis, recommended on Tuesday that investors increase their holdings of U.S. stocks in expectation the Federal Reserve will cut interest rates in the first quarter of next year. He advised investors to have 70% of their assets in stocks, 30% in bonds and hold no cash. The previous recommended mix: 65% stocks and 35% bonds.
Keller said the economy is slowing to the desired “soft landing,” but a recession appears unlikely. “We don’t see those signs. The market would be acting much worse. The broad market is actually acting very well” even as tech crumbles, he said. Indeed, on Tuesday many drug, food, utility and financial stocks rose.
Keller said stocks in economically sensitive sectors such as banking, retail and housing, as well as “high-grade industrial companies” such as Emerson Electric, Ingersoll Rand and Caterpillar, “could be good places to be.”
But he said he still is worried about tech. Although many market watchers are looking for a Nasdaq decline to 2,500 as a bottoming point, Keller said such a move could also touch off a “sellers’ panic” that would be the opposite of the “buyers’ panic” late last year that drove tech up dramatically.
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Market Roundup: C9, C10
