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Stocks' Late Flop Leaves Investors With a Queasy Feeling
By David A. Gaffen
Staff Reporter

4/13/00 5:14 PM ET


That feeling in your stomach isn't indigestion from lunch. It's the realization that we've just been treated to another last-hour collapse in the Nasdaq Composite Index, which, after staying afloat in the last hour, fell into the red to finish at its lowest closing level since Dec. 15, 1999.

The Dow Jones Industrial Average didn't provide any optimism, either, dropping nearly immediately and finishing down more than 200 points.

Major Indices
INDEX CHANGE % VALUE YR TO DATE
Dow -201.58 -1.81% 10,923.55 -5.0%
S&P; 500 -26.66 -1.82% 1440.51 -2.0%
Nasdaq -92.85 -2.46% 3676.78 -9.6%
Russell 2000 -4.22 -0.86% 489.22 -3.0%
TSC Internet -34.19 -4.04% 813.05 -29.5%
NOTE CHANGE PRICE YIELD
10-Year Treasury 4/32 104 6/32 5.931%

Today's action added to the overall sinking feeling among participants. It was another failed rally for the Comp, which at one point was up 145 points, but finished at 3676.78, down 92.85 points. Most of the Dow industrials were weak, despite several strong earnings reports from Dow components. The industrials finished off 201.58 to 10,923.55, a 1.8% loss. The S&P; 500 lost 26.66 to 1440.51.

"Every time it looks its worst, you get a bounce; every time you think we're out of the woods, that's when you get hit," said Sam Ginzburg, senior managing director of equity trading at Gruntal. "Unless something comes out to change the mo', you can't get a good feel. Anyone who says we're near the bottom -- they're crazy. You can't tell -- we're far beyond anything rational."

That does a pretty good job of characterizing the lack of buying conviction in the market. That attitude fed on itself in the last hour of trading. Weakness came in all forms today: from Internet stocks, to paper, to banks and brokerages.

Very few sectors were hit particularly hard. Instead, there was a 2% to 3% drop in various sector indices, more evidence of widespread negativity. It came in all fashions today -- from stocks such as Cisco (CSCO:Nasdaq - news - boards), which was down all day and closed off 5.8%, to Intel (INTC:Nasdaq - news - boards), which managed to slip into the red three minutes before the close, and close off 1 1/16 to 121 1/8.

"There's no conviction; there's no big buying," said Gary Kaltbaum, chief technical analyst at GSG Securities. "Its time to stay on the defensive here. The safe haven [Dow stocks] doesn't seem to be so safe -- people are saying, 'sell any rally you get.'

TheStreet.com Internet Sector index finished down 4%. The Russell 2000 finished down 4.22 to 489.22.

Negativity showed up in stocks that reported reasonably strong earnings today, such as General Electric (GE:NYSE - news - boards), in what would normally be dismissed at 'selling the news' or profit-taking. But that doesn't account for weakness in components such as J.P. Morgan (JPM:NYSE - news - boards), United Technologies (UTX:NYSE - news - boards), and American Express (AXP:NYSE - news - boards), which together accounted for 66 points of negative drag on the Dow.

After an early bounce, sparked by strong earnings reports from stocks as varied as Dow component Honeywell (HON:NYSE - news - boards) and Advanced Micro Devices (AMD:Nasdaq - news - boards), the Dow and S&P; quickly gave up their gains.

The Nasdaq took longer, but was ultimately dragged, kicking and screaming, to finish at its lows of the day. The only tech sector that displayed any strength were major telecommunications stocks held up reasonably well. Nextel Communications (NXTL:Nasdaq - news - boards) rose 7/8 and Level 3 Communications (LVLT:Nasdaq - news - boards) was up 8.3%.

Among the other tech sectors, semiconductors collapsed at the end, as the Philadelphia Stock Exchange Semiconductor Index fell 2.7% on the day. Applied Materials (AMAT:Nasdaq - news - boards), which at one point was up nearly 5 points, finished off 8 3/4 to 89.

The Philadelphia Stock Exchange Computer Box Maker Index fell 1.6%, and the Morgan Stanley High-Tech 35 was down 2%.

The Philadelphia Stock Exchange/KBW Bank Index lost 2% today, while the American Stock Exchange Broker/Dealer Index fell 2%.

Commodity-related stocks had a rough go of it today. The S&P; Chemical Index dropped 3.4%, the Philadelphia Stock Exchange Forest & Paper Product Index fell 2.7% and the Philadelphia Stock Exchange Gold and Silver Index lost 1%.

The Sky's the Limit

Portfolio managers, however, probably because they have long-term performance goals in mind, have been filtering the Nasdaq's woes (and the Dow's mixed performance this week).

But even their faith in tech -- and the buy-the-dip mantra, has been shaken. Dip-buyers came out in earnest with the Nasdaq down 575 points last Tuesday afternoon, and took over for the balance of the week. That's not proven to be a fortuitous bet.

"The broad market wants to settle," said Mike Vogelzang, president and CIO of Boston Advisors, a unit of Advest. "People have been trying to buy the dips and that hasn't been working. That's the big change -- once you've tried that and it hasn't worked, by definition it shakes your confidence."

And yet portfolio managers can't help but think that there's opportunity in some of the names that have been badly beaten. David Brady, senior portfolio manager of the Stein Roe & Farnham Young Investor Fund, who said that despite the correction, "I'm as optimistic as I've ever been, as far as buying opportunities."

He believes the volatility will continue for a number of months; that the choppy trading witnessed in the markets isn't going to go away overnight.

But for anyone with long-term performance objectives, the trading witnessed recently makes them nervous because it's been orderly. It's an indication that the fear that causes people to sell at any price hasn't emerged yet -- with the exception of last Tuesday. And even that day, volume was actually stronger in the afternoon, when the Nasdaq rebounded by 500 points.

"It's still relatively easy to sell into this market," said Vogelzang. "Usually when we start going down this much, guys have a hard time selling. It's like, 'I don't want to sell at 60, it was just at 82.' But if you have a longer time frame, then it's, 'this was just 40.' You just want to lock the gains in."

The Dow Jones Transportation Average lost 49.07 to 2903.56, while the Dow Jones Utilities Average gained 8.63 to 314.43.

Market Internals

Breadth was horrid, and volume was lackluster.

New York Stock Exchange: 1,254 advancers, 1,711 decliners, 1.03 billion shares. 32 new highs, 45 new lows.

Nasdaq Stock Market: 1,422 advancers, 2,795 decliners, 1.9 billion shares. 16 new highs, 238 new lows.

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