SAN FRANCISCO -- After being tossed about to and fro this week by strong earnings (on the one hand) and profit warnings (on the other), Wall Street finally got some economic data to give it direction today. Unfortunately for those long, the direction did not go the way they were hoping.
| Major Indices | | INDEX | CHANGE | % | VALUE | YR TO DATE | | Dow |  
288.21 | -2.6% | 10,739.81 | -6.6% | | S&P 500 |
38.41 | -2.8% | 1360.15 | -7.4% | | Nasdaq |
152.83 | -3.8% | 3886.73 | -4.5% | | Russell 2000 |
12.40 | -2.4% | 504.62 | -0.03% | | TSC Internet |
65.73 | -5.8% | 1075 | -6.9 | | TSC New Tech 30 |
32.36 | -5.3% | 579.76 | -6.2% | | BOND | CHANGE | PRICE | YIELD | | 30-Year Treasury | 
1 6/32 | 96 1/32 | 6.430% |
|
Stonger-than-expected results from the fourth-quarter
employment cost index and
GDP reports heightened concerns the
Federal Reserve could either raise interest rates by 50 basis points at its Feb. 1-2 meeting or continue to tighten for far beyond that meeting. In reaction, stocks sold off sharply while the fixed-income market suffered through its own machinations.
Two-year Treasury notes declined at the thought of a more aggressive Fed and now yield 6.54%, more than the 30-year bond for the first time since March, 1990. However, the long end of the yield curve rallied, thanks to prospects for a reduction of supply and the dollar's strength vs. both the euro and yen. The price of the 30-year Treasury bond rose 1 6/32 to 96 1/32, its yield declining to 6.43%.
The long bond was also aided by investors reallocating assets into bonds from what is looking like an increasingly unstable equity market.
"I do believe there is some form of asset allocation going on -- selling equity to buy bonds," said Timothy Heekin, director of equity trading at
Thomas Weisel Partners in San Francisco. "The fact it's constantly chipping away at names the last two days and breaking support levels consistently has driven institutions to get a little nervous, which exacerbated things."
Many players pegged 1387 as a key support level for the S&P 500 futures, which were lately down 43.80 to 1366. Heekin said he was watching 1339 to 1342 as a bigger "flush out" point.
Regardless, Wall Street was in a tizzy about the deepening inversion of the yield curve, which fueled various (and sundry) rumors about hedge funds facing big losses because of derivative contracts tied to both bonds and currencies.
None of the rumors could be verified but the ghosts of
Long Term Capital Management were spotted by a few of the more spooked traders.
The
Dow Jones Industrial Average fell 288.21, or 2.6%, to 10,739.81; the point decline is the seventh-worst in the Dow's history, although the percentage decline was not of historical significance. The venerable index lost 4.5% for the week and is now down 8.4% from its all-time high of 11,722.98.
Weakness in
General Electric (GE),
J.P. Morgan (JPM) and
Wal-Mart (WMT) exerted the greatest negative drag on the Dow, reflecting broader market trends as well. The
Philadelphia Stock Exchange/KBW Bank Index slid 4% while the
S&P Retail Index lost 4.9%.
The
Nasdaq Composite Index fell 152.83, or 3.8%, to 3886.73, its second-largest point loss ever, although -- like the Dow -- the percentage decline was not as significant.
Tech bellwethers fell in near unanimity, from most established tech plays such as
Intel (INTC) and
Oracle (ORCL) to more recent favorites such as
JDS Uniphase (JDSU)and
Qualcomm (QCOM). The
Nasdaq 100 fell 4.1%.
Internet favorites, led by
Amazon.com (AMZN) also stumbled, sending
TheStreet.com Internet Sector index down 65.73, or 5.8%, to 1075. Amazon.com fell 7.8% after announcing layoffs of 150 people, or about 2% of its workforce.
Meanwhile,
TheStreet.com New Tech 30, declined 32.36, or 5.3%, to 579.26. Unveiled Jan. 5, the TSC New Tech 30 is an expanded index designed to replace the
Red Hots index: The market-cap-weighted index remains focused on tracking the most scorching part of the market, the magnet for Wall Street's hot money. A list of the new index components is available at
http://www.thestreet.com/newtech/.
Among broader market averages, the
S&P 500 fell 38.41, or 2.8%, to 1360.15, its seventh-largest point decline ever. The
Russell 2000 declined 12.40, or 2.4%, to 504.62.
Drug makers were one of the few major industry groups to enjoy solid gains today after
President Clinton failed to tackle the issue of pricing controls for the industry in his
State of the Union speech last night.
Merck (MRK) and
Johnson & Johnson (JNJ) were by far the Dow's best performers while the
American Stock Exchange Pharmaceutical Index gained 1.6%.
Factors cited by some traders for the selling was both the heavy IPO and secondary calendars this week, as well as selling by index funds to account for changes to the S&P 500 taking place after the close today.
Regardless, we're "setting up for a fantastic buying opportunity in equities," Heekin said, predicting a sharp "snapback rally" in the coming days.
"I just think we've gotten pretty oversold, the trader said. "You can't get frightened and let these intraday violations [of support levels] cause you to lose conviction about the market in general."
In
New York Stock Exchange trading, 1.08 billion shares were exchanged while declining stocks bested advancers 2,031 to 994. In
Nasdaq Stock Market action 1.58 billion shares traded while losers led 2,868 to 1,288. New 52-week lows bested new highs 166 to 16 on the Big Board and by 96 to 83 in over-the-counter trading.
"I love this market because it looks like Armageddon [and] this inverted yield curve and the bond market's reaction has everybody so spooked, so baffled," said Scott Bleier, chief investment strategist at
Prime Charter. "The stock market is finally getting a little bit of a correction [and] we have a little more to go down."
Like many, Bleier said the correction in tech stocks is overdue but suggested it will set up "another buying opportunity" when the Comp reaches about 3750 and the Nasdaq 100 hits about 3200; he sees similar support for the Dow around 10,600.
"This volatile market with years' worth of gains coming in days is not over yet," he said. "At some point we need to consolidate these gains, and what gains we had. [But] it's not over until all the Baby Boomers start retiring."
Among other indices,
Dow Jones Transportation Average down 33.52, or 1.3%, to 2581.75; the
Dow Jones Utility Average slid 4.23, or 1.4%, to 306.58; and the
American Stock Exchange Composite Index slid 14.56, or 1.7%, to 868.24.
For the week, the Dow fell 4.6%, the S&P slid 5.6%, the Nasdaq dumped 8.2%, the Russell declined 5.5%, the DOT shed 7.5%, the TSC New Tech 30 lost 13.2%, the Dow transports slid 6.2%, the Dow utilities fell 2.7% and the Amex Composite fell 4.8%.
Market data above are preliminary. For coverage of today's top stocks in the news, see the Company Report, published separately.
>To order reprints of this article, click here:
Reprints
Connect with TheStreet