Tax Selling Sends Dow Tumbling 115 Points
Major stocks indexes tumbled Monday in an apt coda to the market’s worst year in more than a quarter century.
Investors closed the books on a year marked by economic recession, shrinking interest rates, dwindling corporate profits, Wall Street job losses and the Sept. 11 attacks that devastated the heart of New York’s financial district.
“The personal tragedy for so many people on Wall Street makes everyone happy to put the year behind them,” said Rick Meckler, president of investment firm LibertyView. “You combine that with what’s been weak markets, and I don’t think there are many portfolio managers who will miss 2001.”
On Monday, a late wave of year-end tax selling pushed the Dow Jones industrial average down 115.49 points, or 1.1%, to 10,021.50. The S&P; 500 index lost 12.94 points, or 1.1%, to 1,148.08, while the Nasdaq composite index dropped 36.86 points, or 1.9%, to 1,950.40.
Although the major indexes were down Monday, winners and losers finished about even on both Nasdaq and the New York Stock Exchange. Trading volume was light as many investors took the day off ahead of the New Year’s holiday. Fewer buyers and sellers made stocks more susceptible to sharp spikes or declines.
The benchmark Standard & Poor’s 500 index ended the year with a loss of 13%, its worst annual performance since 1974, when it dropped nearly 30%. The Dow lost 7.1% for the year and Nasdaq lost 21.1%.
The last time all three indexes fell for two consecutive years was in 1973 and 1974. (The Dow fell in 1977-78, but the other indexes didn’t.)
Many analysts are predicting better times this year. “2002 should be an up year,” Ned Riley, chief investment strategist at State Street Global Advisors, told Bloomberg News. “We will have more predictable [corporate earnings] forecasts and growing confidence that we are not going to fall into a deeper recession.”
Riley expects 10% gains for the Dow and S&P; 500 this year.
Monday was the last day to sell stocks for any write-offs on 2001 tax bills, so analysts weren’t surprised at the market’s tone. Much of the selling was focused in the technology sector. Gateway slipped 30 cents to $8.04, while Microsoft fell $1.62 to $66.25. Nine states on Monday opposed a Microsoft request for more time to produce evidence in the antitrust case against the company.
Semiconductor stocks were broadly lower, with the SOX chip stock index falling 3.1%. PMC-Sierra fell $1.52 to $21.26. It declined 73% in 2001. Broadcom slid $2.13 to $40.87, and was off 52% for the year.
Database software maker Oracle slipped 25 cents to $13.81. Friday, after regular trading ended, the company said it would cut between 400 and 800 jobs, mainly in its North American consulting and sales operations. The stock sank 52% in 2001.
Some retailers also were weak Monday. Gap fell 7 cents to $13.94, while Wal-Mart Stores dropped 80 cents to $57.55. Gap slumped 45% in 2001; Wal-Mart was up nearly 9% for the year.
Among Dow stocks, investors took profits in some of the year’s better performers, including IBM, which fell $1.94 to $120.96 but was up 43% for the year, and Johnson & Johnson, which was off 76 cents to $59.10 but was up 14% for the year.
Still, analysts said the U.S. market largely shrugged off news that Argentina’s third president in two weeks had resigned. The country’s serious economic problems prompted the first resignation barely a week ago; since then two other men have accepted and then stepped down from the post.
Argentina’s market, and many other overseas markets, were closed on New Year’s Eve. Britain’s market was open, and the FT-SE 100 index fell 0.5%. The Mexican market lost 1.5%.
U.S. and most foreign markets will be closed today for New Year’s Day.
In other market highlights:
* Some airline stocks got an early boost after America West Airlines became the first carrier granted loan guarantees under the government’s $15-billion industry bailout package. Delta Air Lines rose 74 cents to $29.26 and American Airlines parent AMR gained 30 cents to $22.30. America West rose $1.03 to $3.50.
* Biotechnology company ImClone tumbled $8.79 to $46.46 after the company said it expects the launch of its experimental colon cancer treatment, Erbitux, to be delayed until at least the third quarter of 2002 after questions were raised by U.S. regulators over the drug’s clinical data. The drug was to be co-marketed by Bristol-Myers Squibb to patients who had failed to respond to previous chemotherapy treatments. Bristol-Myers fell 80 cents to $51.
* Gold mining stocks, strong performers in 2001 despite only modest net gains in the metal’s price, rose further. Placer Dome rose 25 cents to $10.91; Glamis Gold added 16 cents to $3.61.
Gold futures ended at $278.70 an ounce in New York, up from $273.60 a year ago.
* Bond yields fell as investors were lured by 10-year Treasury note yields that are hovering near four-month highs. The yield on the 10-year T-note fell to 5.02% from Friday’s close of 5.11%, while the yield on the two-year T-note slid to 3.05% from 3.16%.
A year ago the 10-year T-note yield was at 5.11% and the two-year T-note was at 5.10%.
* The dollar ended in New York at 131.62 yen, up from 131.24 Friday. The yen has tumbled in recent weeks as traders bet the government wants a weaker currency to help boost Japanese exports. One dollar bought 114.4 yen a year ago.
* About two hours before the close, floor brokers and traders gathered on the floor of the NYSE to sing “God Bless America.” Mayor Rudy Giuliani, who was in the final day of his second four-year term as the mayor of New York City, rang the final closing bell of the year at the world’s biggest exchange.
Market Roundup, C7-8
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