So Much for an End to Tax-Loss Selling, and Don't Bank on an Early Cut

SAN FRANCISCO -- The new year opened on a decidedly depressing note for those who own equities. By day's end, it had become pretty clear that tax-related selling did not cease just because the calendar changed. That contributed mightily to today's declines of 1.3% for the Dow, 2.8% for the S&P 500 and 7.2% for the Nasdaq Composite, the seventh-largest percentage drop in its history.

But tax issues didn't seem an obvious culprit this morning, as people focused on the starkly weaker-than-expected NAPM report (more on that in a minute). Nor at midday, when I noted in the Columnist Conversation the following observation from Sean Mueller of Mueller Capital Management in Denver:

Losses today are being caused by people selling the highfliers such as Brocade (BRCD Quote), Juniper Networks (JNPR Quote), Check Point Software (CHKP Quote), and Veritas (VRTS Quote). These stocks had to get hit because people still wanted to sell them [prior to Dec. 31], but didn't want to take the tax hit in 2000. Mutual funds not wanting to sell and hurt their own performance were buying and supporting these stocks on Friday trying to protect their quarter. Nobody is buying these stocks today.

...