Some Gains on a Day of Declines
Airline, entertainment and leisure stocks were hard hit Monday and key indexes plunged after the market reopened for the first time since last Tuesday’s terrorist attacks. Defense and security stocks were among the few bright spots.
“After all that’s happened, this looks like a measured response to last week’s event,” said Stuart Schweitzer, global investment strategist at J.P. Morgan Fleming Asset Management in New York. “The way the world’s markets were down last week, it would have been very surprising if we did not suffer substantial declines.”
The Dow Jones industrial average fell 684.81 points, or 7.1%, to 8,920.70. The plunge finally pushed the Dow into bear-market territory: It’s now down 24% from its 2000 peak. It was the index’s biggest one-day point drop ever, and left it below 9,000 for the first time in more than 2 1/2 years. It was the 14th-worst drop ever in percentage terms.
The technology-heavy Nasdaq composite index tumbled 115.83 points, or 6.8%, to 1,579.55 on Monday, leaving it down 69% from its peak of March 2000.
The Standard & Poor’s 500 index held up somewhat better, declining 53.77 points, or 4.9%, to 1,038.77. S&P;’s mid- and small-cap indexes slid 4.8% and 5.1%, respectively.
Overall, losers swamped winners by nearly 6 to 1 amid record volume on the New York Stock Exchange.
The fact that trading mostly went smoothly was seen by many as a victory.
“People came together, systems came up, and the market stayed open all day. In a sense, that was a positive outcome,” said Stuart Freeman, chief equity strategist at A.G. Edwards in St. Louis.
It was far from business as usual, however.
John Buckingham, co-manager of the Al Frank Fund in Laguna Beach, said a trade order he placed at the market’s open took 90 minutes to go through, rather than the usual 30 seconds.
After that, he decided to do very little trading. Monday was “a day to say, ‘Let’s wait and see what happens,’ ” he said.
But some fund managers said they were bargain-hunting after the sharp sell-off at the market’s open.
Nicholas Gerber, manager of the Ameristock and Ameristock Focused Value funds in Moraga, Calif., added to his focused fund’s stakes in KLM Royal Dutch Air and Midwest Express Holdings. KLM lost $2.74 to $9.35 while Midwest Express lost $5.65 to $10.15.
“We thought they were cheap a week ago,” Gerber said. “Now the airline industry just got marked down a whole lot more.”
Elsewhere in that sector, Delta lost $16.61 to $20.64, US Airways Group lost $6.05 to $5.57 and AMR, parent of American Airlines, lost $11.70 to $18.
Gerber said he also might buy hard-hit retailers such as Gap and Sears if they fall further. Gap lost $2.37 to $12.51 and Sears lost $4.16 to $34.62.
Mutual fund companies reported heavy investor traffic on their phone lines and Web sites, but it’s unclear whether concerned investors are pulling large amounts of money out of their mutual funds.
Steve Norwitz, spokesman for T. Rowe Price Group in Baltimore, said his firm saw “fairly modest net outflows” Monday from domestic stock funds, continuing last week’s pattern.
“There has definitely been a reaction, but I wouldn’t call it panic,” he said. “Investors are clearly concerned, but we’ll have to see what kind of follow-on activity there is.”
The firm’s cumulative net outflows are far below 1% of its domestic stock fund assets, he said.
“This doesn’t begin to compare with 1987. It’s not in that territory yet,” he said, referring to the huge mutual fund redemptions after the October 1987 market crash.
At Charles Schwab’s mutual fund supermarket, sellers outnumbered buyers by about 2 to 1, said spokesman Lance Berg. “I’d call it significant selling but nothing indicating panic,” he said.
Some individual investors were expressing optimism, even in the face of Monday’s vicious sell-off.
“Even though there’s a financial crisis, there is money to be made,” said Scott Christopher, a mortgage broker who was in a Charles Schwab office in Pasadena to open an account.
“I’m not selling anything,” added William Merriken, a Pasadena investor. “I intend, at some point, to buy. I think we need to support our financial system.”
Buckingham, of the Al Frank Fund, said he wants to get a handle on investor cash flows before buying stocks.
“If we and other fund companies don’t see redemptions, then we can start to redeploy money,” he said. “It’s hard to gauge what the individual investor’s reaction will be when he turns on his TV [Monday night] and sees that his mutual fund is down 6%, 7%, even 10%.”
Insurance stocks declined, but not as dramatically as some had feared. Class B shares of Berkshire Hathaway, parent of reinsurer General Re, lost $140 to $2,133, while American International Group lost $3.26 to $71.
Leisure, travel and entertainment stocks suffered bigger losses.
Walt Disney lost $4.33 to $19.25, Starwood Hotels lost $8.40 to $21.15, cruise line Carnival lost $9.09 to $19.43 and online travel services provider Sabre Holdings lost $16.13 to $23.30.
High-profile defense contractors rallied, including Northrop Grumman, up $12.86 to $94.80, and Raytheon, up $6.65 to $31.50.
Some lesser-known security-related electronics firms rallied fiercely on expectations they will benefit from new orders in the wake of the terrorist attacks. InVision Technologies, which makes explosive-detection devices, rose $5.14 to $8.25 and Visionics, which makes ID systems designed for law enforcement, rose $3.98 to $8.25.
Market Roundup, C9, C10
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Times staff writer Kathy M. Kristof contributed to this report.
