Market plummets as tech stocks dumped
NEW YORK – Investors alarmed by a series of warnings from high-tech companies pummeled stocks Monday, sending the Nasdaq composite index skidding below 2000 for the first time in 27 months and slicing more than 400 points from the Dow Jones industrial average.
The extent and speed of the selloff stunned even investors who have become accustomed to the bearish atmosphere that has pervaded Wall Street for months. Monday’s losses extended a selloff that began last week when tech bellwethers Yahoo!, Intel and Cisco Systems said the weak economy will hurt business in the coming months.
”I’m not going to jump out any windows … but this is significant,” said Jim Jordan, a Lexington, Ky., marketing executive who estimates he’s lost as much as $200,000 recently. ”I’m going to ride out the storm, though.”
The Nasdaq dropped 129.40 to 1,923.38 in heavy trading, a 6.3 percent loss. The tech-focused index is now down nearly 62 percent from the closing high of 5,048.62 it reached on March 10, 2000. The last time the index closed below 2,000 was Dec. 14, 1998.
The selling spilled over to blue chips that lately had escaped investors’ fury. The Dow fell 436.37 to 10,208.25, a 4.1 percent decline, leaving it nearly 13 percent off the closing high of 11,722.98 it reached Jan. 14, 2000.
While the decline was the Dow’s fifth-biggest point loss, it was not even among the index’s top 25 percentage drops. The index managed to recover from a decline of 477 points shortly before the close.
Wall Street’s broadest measure, the Standard & Poor’s 500, plunged 53.26 to 1,180.16 for a loss of 4.3 percent. The S&P has lost nearly a fourth of its value since its closing high of 1,527.46 reached March 24 last year.
Losses were widespread, reflecting investors’ worries that technology stocks are still overpriced and might take a while to recover because of the weakened economy.
Cisco dropped as Wall Street continued to react to the networking company’s announcement Friday it will trim several thousand jobs because of soft demand for its products. Cisco was off $1.81 at $18.81, a nearly 9 percent loss.
Investors also sold off Intel, down $1.69 at $27.75, and Microsoft, down $4.75 at $51.94.
”The Nasdaq is in a freefall and every time you try to time the bottom of this market, you get your head handed to you,” said Bill Barker, an investment consultant with Dain Rauscher.
The Dow fell along with its technology components, which include Intel and Microsoft, but stocks considered less risky investments in times of economic weakness also declined. Merck fell $1.54 to $74.15, while Philip Morris dropped $2.15 to $49.60.
Financials suffered, among them J.P. Morgan, down $3.46 at $45.49.
Barker said the market’s decline is the result of several factors, including disappointment that the Federal Reserve isn’t lowering rates more aggressively. Margin calls might be another factor, as the sinking market forces investors to sell stocks to repay brokerage loans.
The biggest reason, however, is frustration over the fact that there’s no apparent end to weak earnings. With the end of the first quarter approaching and earnings warnings season beginning, the bad news may just be starting.
”We just don’t have anything to look forward to,” Barker said. ”The interest rate cut we’ll get later this month has already been factored into stock prices. The tax bill will probably get hung up in the Senate. And this bad earnings news keeps coming.”
Analysts have been saying for weeks that the market’s tumble appeared to be over, but the intensity of the market’s negative feeling Monday showed that it’s impossible to predict when the market will bottom.
”People are pitching stocks over the side no matter what,” said Peter Anderson, chief investment officer at American Express Financial Advisors.
There was scattered buying in after-hours trading. But most investors appeared to be staying on the sidelines.
”I’ve lost about 20 to 25 percent of my investments,” said Tim Penning, a 37-year-old public relations director in Grand Rapids, Mich. ”I do feel a little worried but I’m constantly being told by my broker and friends that I’ve got plenty of time before I’ll need this money, and not to get upset.”
Declining issues outnumbered advancers 4 to 1 on the New York Stock Exchange. Consolidated volume came to 1.45 billion, compared with 1.28 billion Friday.
The Russell 2000 index fell 15.25 to 458.40, a 3.2 percent loss.
Overseas, Japan’s Nikkei stock average lost 3.6 percent. Wall Street’s decline was also felt in Europe: Germany’s DAX index closed down 2.5 percent, Britain’s FT-SE 100 fell 1.5 percent, and France’s CAC-40 slipped 2.4 percent.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
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