It was a gory scene during morning and early-afternoon trading. Wall Street was showing no mercy as investors went on a selling spree, knocking the
Dow Jones Industrial Average
, at one point, below the 10,000 level and leaving the
Nasdaq Composite Index
off its highs after
yesterday's record-breaking session.
Today, investors are continuing to route cash toward the high-priced tech stocks that boast extreme valuations, leaving the Dow cyclicals slumping. So why are these "value" stocks so neglected? Many money managers can't seem to put their finger on it.
"It's very strange," said Brian Gilmartin, portfolio manager at
Trinity Asset Management
. "With strong earnings the Dow 30 are still experiencing sharp selloffs. The decline in the price of companies such as
do not indicate a corresponding deterioration in the fundamentals."
Lately, the Dow was plummeting 198, or 1.9%, to 10,027, with its interest-rate-sensitive financial components, including
, pulling the index down.
The Dow's dip below the 10,000 support level made for some uneasy trading, as market players looked for buyers to hold the line.
"I think the key support level will be more important at today's close," said John Manahan, head trader at
Brown Brothers Harriman
. "Hopefully, they're going to make a stand here and get buyers in, but it seems if it's not a four-letter stock, no one wants to buy it."
But others dismiss the 10,000 level as psychological, because the randomness of the index doesn't seem to accurately represent today's market. "If it wasn't for
, it could have been worse, said Bill Meehan, chief market analyst at
, referring to the tech heavyweight's presence in the Dow. "What's going on in the Nasdaq and
is where all the action is. Maybe
should have added in
"Some insiders put targets on the Dow last year," Meehan went on. "When 13% of its components changed, I don't recall the insiders changing their targets. It was as if they expected Intel and Microsoft to behave the same way as
Lately, the Nasdaq was up 6, or 0.1%, to 4557, clinging to the plus side despite some profit-taking after yesterday posting its largest point gain ever. In
Nasdaq Stock Market
Research in Motion
was hitting a new high, up 19, or 16.1%, to 137 1/4, while
was falling 9 15/16, or 6.8%, to 136 15/16, after China delayed approval for a mobile phone network that would use its technology.
recent rate-hike warnings have not sent tech buyers running scared. Tech investors have conviction that interest won't dent their investments, which rely mainly on capital in earned in the stock market instead of credit. According to Meehan, however, this belief could be a huge investor oversight.
"It's further proof that we're in a mania right now," he said. "Tech doesn't tap into credit market when it can get free money in the equity market. However, the improvement in productivity is a function of selling technology to companies, such as banks, manufacturers and retailers, that are affected by interest rates. The rate that they will invest will be impacted if interest rates rise, and that will impact tech companies."
Elsewhere in techland,
TheStreet.com Internet Sector
index was up a fraction to 1168.
was doing its part to keep the measure in positive territory, bouncing 17 1/4, or 8.3%, to 225.
The broad S&P 500 was down 20, or 1.5%, to 1341, while the small-cap
was up 2 to 551.
Breadth was negative on heavy volume.
New York Stock Exchange:
908 advancers, 1,963 decliners, 680 million shares. 44 new 52-week highs, 268 new lows.
Nasdaq Stock Market:
1,703 advancers, 2,300 decliners, 1.2 billion shares. 228 new highs, 98 new lows.
For a look at stocks in the midsession news, see Midday Movers, published separately.