For a market that's been known for setting records, today was no exception. But the direction of the milestones was a definite shock to the system.
Nasdaq Composite Index
tumbled 229.46, or 5.7%, to 3901.69, after surging and closing at an all-time high
yesterday. It was the largest point decrease in the Comp's history, beating the old record of a loss of 140.43 on Aug. 31, 1998.
Dow Jones Industrial Average
gave up 359.58, or 3.2%, to 10,997.93. It was the fourth-largest point decline in the Dow's history. The stumble, however, didn't even rank in the top 10 for percentage declines.
slumped 55.80, or 3.9%, to 1399.42. The small-cap
shed 18.04, or 3.7%, to 478.38.
The market: Join the discussion on
Although the session was painful and a negative mood, particularly on the interest-rate front, assaulted the market, there is some upside perhaps on the horizon.
Jon Olesky, head of block trading at
Morgan Stanley Dean Witter
, pointed out that the seasonal money flow -- pension money, retirement account money, bonus money -- has been delayed because of concerns over Y2K. Olesky said he believes the market will start to see that money dynamic next week and the week after.
Olesky said he has the sense that next week you could see a totally different market, volatile on the upside instead of the downside.
Some traders and analysts cited money managers and individuals cashing out of profitable positions from last year as a reason for the selloff, notably in the Nasdaq Composite. Some of the impetus for the dumping of stocks was put on the bond market's lousy recent performance, inflation fears and
interest-rate-hike worries. There's talk in the market that the Fed could raise short-term interest rates by 50 basis points in February.
Many market analysts have been calling for the tech sector to suffer a correction this month as money managers sell off their winners after having kept them on their books for year-end, and now, with the new year here, they're able to book some gains. Also, individuals are said to be doing some deferred tax-loss selling now to put off paying their capital gains taxes until 2001.
"It's been orderly, however orderly a 300-point drop can be," said Jay Suskind, head of institutional equity trading at
, around midafternoon. Suskind said there wasn't a sense of panic in the market and that there was a feeling in the market that the selloff was overdue.
While players took money out of tech, they didn't put it anywhere else, as the rest of the market fell along with tech as visions of rate hikes plagued a wide swath of sectors of the market. "The bothersome thing is there hasn't been a rotation," Suskind said.
"You just see a bloodletting-type day," he said. "I think it'll be a choppy week." He added that "it's healthy to get a little bit of a flush-out." Somewhat mirroring Olesky's comments, Suskind pointed out that "the one saving grace" of the selloff is that a lot of money's been made in the market and there will be a lot of cash out there to put to work.
TheStreet.com Internet Sector
index swooned 82.77, or 7.1%, to 1135.58, after closing at an all-time high yesterday. Yesterday's DOT leaders
played the same role today, although it was on the downside as both stocks dropped sharply.
Red Hots index said toodles to 36.70, or 7.5%, to 453.53. The 20-stock index tracks action in particularly volatile stocks and is meant to measure so-called hot money. (You can check quotes on the Red Hots index and its component stocks at
Bonds Rebound; Financials Don't Follow
The 30-year bond leapt 1 3/32 to 94 20/32, putting its yield at 6.53%, as the long bond regained most of the large amount of ground it gave up
Still, Wall Street's disquiet about the high level of yields persists. As they did yesterday, financials got crushed. The
Philadelphia Stock Exchange/KBW Bank Index
tumbled 4.3%, while the
American Stock Exchange Broker/Dealer Index
gave up 4.2%. The
Nasdaq Financial-100 Index
Biotech stocks were decimated after
Salomon Smith Barney
downgraded a few stocks in the sector. The
American Stock Exchange Biotechnology Index
swooned 8.7%. Salomon downgraded
Meanwhile, one prominent Wall Street strategist was out today with a slicing of his recommended asset allocation for stocks.
John Manley, equity strategist at Salomon, lowered his recommended weighting in equities to 55% from 60% and raised his cash recommendation to 10% from 5%. Manley left his bond weighting unchanged at a neutral 35%.
As one of the rationales for the move, Manley noted that stocks have blown away the performance of bonds by more than 70% when measured off the prior two-year low. That level of equity outperformance of bonds, Manley wrote, has happened only twice in the last 30 years, in 1980 and 1987. In those instances, the stock market subsequently put in a poor showing over the next three to six months.
In the news,
renominated Fed Chairman
as Fed chief for a fourth term. Greenspan has led the Fed for more than 12 years. Greenspan was first appointed on Aug. 11, 1987, as chairman and a member of the Fed board, was reappointed for a 14-year term as a board member in 1992. Since that term obviously ends in 2006, not reappointing him chairman and leaving him on the board would have been unusual, if not downright bizarre, considering who the G-Man is.
"That was a nonevent," said Suskind of the Greenspan reappointment.
New York Stock Exchange
trading, 989.9 million shares were exchanged while declining stocks crushed advancers 2,236 to 911. In
Nasdaq Stock Market
action 1.489 billion shares traded while losers thumped winners 3,122 to 1,134. New 52-week lows beat new highs 162 to 24 on the Big Board while new lows beat new highs 136 to 64 in over-the-counter trading.
Among other indices, the
Dow Jones Utility Average
rose 1.80, or 0.7%, to 278.51. Elsewhere, the
Dow Jones Transportation Average
fell 81.50, or 2.8%, to 2862.17; the
American Stock Exchange Composite Index
stumbled 10.09, or 2.2%, to 849.65.
Trading in the
, the Nasdaq 100 unit trust, set an all-time volume record today of more than 16 million shares. "Institutions were mostly sellers and retail customers mostly buyers," said one Amex market maker in the shares. "There was a lot of retail bottom-fishing all the way down, so it was basically an orderly selling. Institutions were selling it against all the other stuff they were long, and retail was buying it back." The QQQ closed down 7.2% to 175 7/8.
For a look at stocks in the news today, see the Company Report, now published separately.
Erin Arvedlund contributed to this story.