Sat, Mar 31, 2001 EST
fundsnav.gif (2552 bytes)
account management
business home

Markets Head South as Disappointed Investors React
To Fed Rate Cut

By Amy Baldwin   Associated Press
  E-mail This Story

NEW YORK — Investors, disappointed by the Federal Reserve's latest interest rate cut, turned their fury on Wall Street yet again Tuesday, sending prices skidding and leaving the Dow Jones industrials at their lowest level in two years.

Many investors had hoped the Fed would slash rates by an aggressive 0.75 percentage point, but when the central bank announced in mid-afternoon it was lowering rates by 0.50 for the third time this year, stocks began to slide.

The decline continued the massive selloff that last week gave the Dow its biggest one-week point drop ever. Analysts called the market's mood about as grim as the litany of profit warnings that have pulled Wall Street's major indexes into bear market territory.

"Negative psychology is increasing and confidence is eroding," said Alan Ackerman, executive vice president of Fahnestock & Co. "It is fair to say, with prices drifting downward, everything appears to be for sale from Main Street to Wall Street."

The Dow ended a heavily traded session down 238.35 at 9,720.76 The last time the Dow closed lower was March 24, 1999, when it dropped 154.90 to 9,666.84.

The blue chips were trading at the 10,000 level just before the Fed announced its decision.

Broader market indicators also turned downward. The Nasdaq composite index tumbled 93.74 to 1,857.44, a closing low not seen since November 1998.

The Standard & Poor's 500, Wall Street's broadest indicator, fell 28.19 to 1,142.62. The last time the S&P; closed lower was December 1998.

The market was disappointed by the Fed, Ackerman said, because the central bank needed to "do something dramatic to show that it recognizes the need for improved confidence," among consumers and investors. Many investors believed an extraordinarily large rate cut was needed to prompt consumers and businesses to increase spending and reinvigorate the economy.

Tuesday's drop left the Dow, which has now lost 1,137.49 over the past eight sessions, down 17 percent from its high close of 11,722.98, reached Jan. 14, 2000.

The Nasdaq, meanwhile, is off more than 63 percent from its own high close of 5,048.62, reached March 10, 2000, and the S&P; 500 has lost more than a quarter of its value since peaking at 1,527.46 a year ago.

Investors also sold amid confusion about just how much the economy is hurting, because data is unclear about the extent to which growth has slowed, said Ronald J. Hill, investment strategist at Brown Brothers Harriman & Co. He noted, for example, that while slumping consumer demand has created big inventory gluts, employment remains strong.

"The market is sort of groping for a bottom. We haven't had a real cathartic selloff, but last week felt pretty ugly," Hill said.

Wall Street's pessimism has been increasing since last week's debacle that gave the Dow its worst-ever weekly point drop of 821.21.

The companies whose bleak outlooks helped trigger last week's selloff also fell sharply Tuesday. Compaq Computer declined 85 cents to $17.75, while Oracle tumbled $1.06 to $14.38.

Last week's blue chip decline, which was also spurred by bad economic news from Japan, particularly rattled investors because such routs had been largely confined to the tech-laden Nasdaq. Investors had bid blue chips higher, believing the broader market was mostly intact despite the cooling economy.

Now investors are worried about the degree to which non-tech companies stand to suffer from the slowing economy. Investors interpreted the slimmer cut by the Fed as reason to punish economically sensitive sectors such as financial and retailing stocks, along with consumer cyclicals like auto shares.

General Motors, which is idling two assembly plants this week as it whittles down inventories, fell $1.10 to $55.19.

Retailing stocks fell as investors bet that consumers would continue to curb their spending. Electronics retailer Best Buy plunged $2.40 to $41.60.

Likewise, financial stocks traded lower on the notion that consumers and businesses will borrow less. Citigroup stumbled $2 to $44.30.

Declining issues outnumbered advancers nearly 18 to 13 on the New York Stock Exchange, where consolidated volume was 1.45 billion shares, ahead of 1.32 billion on Monday.

The Russell 2000 index, which tracks the performance of smaller companies stock, fell 6.79 to 444.48.

Overseas, Japan's Nikkei stock average slipped 0.3 percent amid fears that deflation and banking problems would cripple the economy.

However, stocks in Europe moved higher. Germany's DAX index rose 2.2 percent, Britain's FT-SE 100 advanced 1.7 percent, and France's CAC-40 climbed 1.8 percent.

More Marketwire More MarketWire News Top of Page

© 2000, News Digital Media, Inc. d/b/a Fox News Online
All rights reserved. Fox News is a registered trademark of 20th Century Fox Film Corp.
Data from Thomson Financial Interactive is subject to the following Privacy Statement
© 2000 Associated Press. All rights reserved.
This material may not be published, broadcast, rewritten, or redistributed.
© 2000 Reuters Ltd. All rights reserved