Market Brief

Thursday March 22, 2001

NEW YORK — Investors punished stocks once again Wednesday, directing their anger mostly at blue chips as they grappled with disappointment over the Federal Reserve’s interest rate policy. The Dow Jones industrials tumbled 233 points, the sixth time in the past nine sessions that the index has dropped by triple digits. 

Wall Street’s foul mood about the economy and earnings sent the Dow lower at the start of Wednesday’s trading, and selling intensified during the last hour of the session. 

“The market is just not happy,” said Dan Ascani, president and research director at Global Market Strategists in Gainesville, Ga. “It’s very serious ... This has spread to Corporate America from the tech stock bubble burst. That’s not a good sign for the economy.” 

Stocks extended the decline they suffered Tuesday when the Fed cut interest rates by 0.5 percentage point. Investors believed that a more aggressive 0.75 point reduction was needed to boost the slowing economy and anemic corporate profits, and the Fed’s failure to deliver a bigger cut prompted the market to sell heavily. 

“Just as there seemed to be no end in sight on the upside a year ago, the market is equally dismal right now,” said A.C. Moore, chief investment strategist for Dunvegan Associates in Santa Barbara. “Positive sentiment feeds on itself; negative sentiment feeds on itself.” 

He added that the selling was overdone given that the Fed has said it will lower rates as much as is needed to stimulate the economy. “The markets pretty much have a mind of their own. (The cut) may be exactly what the economy needs, but it’s not what the market had built into expectations,” Moore said. 

Wall Street has been increasingly downtrodden since last week’s steep drop that gave the Dow its worst-ever weekly point drop of 821.21. Investors had been bidding up safer blue chip stocks, believing they remained relatively intact and that technology issues were most vulnerable amid slower economic growth.  


— The Associated Press 

But evidence that the slowdown is affecting many other businesses has hurt blue chips. 

On Wednesday, Procter & Gamble, a Dow stock, slipped $2.70 to $63.20 on a Wall Street Journal report that the maker of Crest and Jif is considering eliminating 10 percent to 20 percent of its global work force. 

Other consumer product makers fell, including Kimberly Clark, down $2.39 at $67.01. But blue chip losses were spread across sectors. Merck fell $2.29 to $67.96, while General Motors declined $1.67 to $53.52. 

Meanwhile, the tech sector was more mixed. IBM advanced 78 cents to $89.08, while Microsoft tumbled $2.63 to $50.06. Both are Dow components. 

Despite Wednesday’s selling, some analysts were somewhat hopeful stocks will soon move higher. They noted that in Wednesday’s dealings the tech sector held up better than Old Economy stocks, which tend to fare better in bear markets. 

“Although we were disappointed (Tuesday), the people who are willing to get back in today are doing so in the most beaten up sectors, like technology and telecommunications,” said Arthur Hogan, chief market analysts for Jefferies & Co. 

However, other analysts believe the weakness in blue chips means the economy has slowed more than thought and that investors aren’t finished selling. 

“I’m not sure there has been capitulation yet,” said Ascani from Global Market Strategists. “There are still too many people left over from the bull market who have held on.” 

Adding to Wednesday’s heavy selling was news that inflation at the consumer level rose 0.3 percent in February, slightly worse than the 0.2 percent increase Wall Street expected. Rising costs for food and prescription drugs accounted for the uptick, according a report issued earlier by the Labor Department. 

Declining issues widely outnumbered advancers 11 to 4 on the New York Stock Exchange, where consolidated volume was a heavy 1.56 billion shares, compared with 1.45 billion on Tuesday. 

The Russell 2000 index, which tracks the performance of smaller companies stocks, fell 8.74 to 435.74. 

Overseas, Japan’s Nikkei stock average soared 7.5 percent, its seventh-largest percentage gain ever and its highest close in three weeks. Stocks moved strongly higher after the Japanese government said it expects within six months to have a plan for dealing with crippling debt at the nation’s banks. 

However, stocks in Europe moved lower. Germany’s DAX index fell 2.8 percent, Britain’s FTSE 100 slipped 1.9 percent, and France’s CAC-40 declined 2.2 percent. 


On the Net: 

New York Stock Exchange: http://www.nyse.com 

Nasdaq Stock Market: http://www.nasdaq.com