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Change Your Life! |
Stocks collapse as Nasdaq's weakness spreads |
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April 6, 2000
NEW YORK, APR 5 (AP) - Fueled by an exodus from all things technological, the stock market went into a stomach-churning rout Tuesday, with the Nasdaq composite index and Dow Jones industrials each dropping more than 500 points. But the stampede reversed as buyers returned in search of bargains, and most stocks ended the turbulent day with only moderate losses.
The sell off, which gave Wall Street its most volatile day ever, came amid a collapse of the euphoria over high-tech issues that had driven the Nasdaq to unprecedented gains in recent months. Analysts said they couldn't point to any one factor in Tuesday's massive selling, but most said the purge was long overdue.
"As hard as it is to believe, this is a good thing," said Pete Anderson, chief investment officer at American Express Financial Advisors in Minneapolis. "One sector of the market was insanely overvalued. The rest was deeply undervalued. Now we are reversing that."
The Nasdaq and the Dow each recorded their widest point swings in history on record volume. The Nasdaq, dominated by the technology stocks that have plunged the past three weeks, was down 574.57 points at midday, then clawed back to finish down 74.79 at 4,148.89. From its high to its low, the Nasdaq moved more than 634 points.
The Dow rose 196.23 points Tuesday morning before careening to a loss of 503.53 in early afternoon. It finished down 57.09 at 11,164.84, having made its way back to positive territory briefly before turning lower once again. It swung more than 700 points during the day.
The Standard and Poor's 500 fell 11.24 to 1,494.73 and the Russell 2000 index of smaller companies plunged 9.92 to 506.12.
Among the tech stocks that got hit and then recovered was JDS Uniphase, a maker of parts for fiber-optic networks. It fell as much as 19 5/8, and ended down 4 5/8 at 107.
IVillage, which runs a Web site targeted at women, wasn't as lucky. It fell 1 9/16 to 11 11/16. Last spring, its share price was 130.
Microsoft, a catalyst for the record 349-point drop in the Nasdaq on Monday, fell another 2 5/16 to 88 9/16 in the wake of a federal judge's antitrust ruling against it.
"The simple, rational thing to say is that that the technology sector is coming back to Earth," said Hugh Johnson, chief investment officer at First Albany Corp. "We've gone through a period of dramatic speculation, and historically, every period of speculation has been followed by a period of distress."
Among the factors in Tuesday's selling were what's known in the market as margin calls. When investors buy stock using borrowed money, known as margin, they are forced to sell if prices drop sharply.
On the floor of the New York Stock Exchange, sell orders stacked up at trading posts and drove traders outside the building in search of a brief respite.
"I was so busy, honest to God, I didn't know how bad we were down," said Terrence O'Donnell, trading clerk with Salomon Smith Barney. "I was literally buried in paper."
Analysts said the swiftness of the sell off evoked memories of October 1997, when the Dow fell 554 points in a single session as financial crises in Asia and Russia gripped world markets. But market watchers noted one crucial, though perplexing, difference.
"We haven't seen a bout of panic selling like today's since then, but there was a clear catalyst then, and there isn't one now," Galvin said.
In Austin, Texas, investor Michael Miglini made no secret of his distress.
"I lost more money in this week than I made in the previous two years," said Miglini, 31, who recently sold his construction company and invested in the stock market. Most of his holdings are in technology stocks.
"It was the absolute worst timing possible," he said. "It's a painful lesson."
For some, however, the pain was short-lived. Computer programs that triggered selling on the way down eventually sparked buying. Investors resumed their recent shift to blue-chip stocks, which are seen as more stable and less speculative than their high-tech counterparts.
Procter and Gamble, the big consumer products company that has been beaten down lately on profit woes, rose 3 15/16 to 63 7/16. Drug maker Merck rose 15/16 to 67 11/16. Both are components of the Dow industrials.
The largest of the technology stocks recovered, too. Computer network maker Cisco Systems ended up 3/16 at 73 1/8. Analysts pointed out that even with the wide swings of many stocks, investors in most technology names are still posting dramatic gains for the year.
Investors also found refuge in the bond market. Prices soared, bringing the yield on the 30-year Treasury bond down to 5.77 percent from 5.81 percent late Monday.
By the end of the session, Wall Street analysts were looking cautiously to a handful of factors that could halt the decline of technology stocks and lift the market anew. Corporate earnings reports, which will flood the market in the next few weeks, are expected to be strong.
Also, some market watchers said the market's implosion may convince the Federal Reserve that it won't need to intervene further to slow the economy.
"If the market does the Fed's job, and forces a slowdown, I think the Fed could take their feet off the brakes," First Albany's Johnson said.
Overseas, Japan's Nikkei stock average fell 0.6 percent. Germany's Xetra DAX index rose 1.3 percent, Britain's FT-SE 100 fell 0.5 percent, and France's CAC-40 rose 1.5 percent.
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