It says something about the state of things that today seemed like just another day at the office on Wall Street.
The first trading day since
largest bankruptcy filing in U.S. history was earmarked by now familiar attempts by President Bush to reinstall faith in the economy and market. Ultimately, major averages ended with fairly steep declines after another session of wild swings.
After having traded as low as 7717.29 and as high as 8103.86, the
Dow Jones Industrial Average
closed down 2.9% to 7784.58, its first close below 8000 since Oct. 14, 1998. The
lost 3.3% to 819.85 vs. its midday low of 813.26 while the
shed 2.8% to 1282.65 after trading as low as 1272.46.
"You've got a continuation of what we've had -- a lack of confidence in corporate America and earnings, and concern over the international situation," said Jim Volk, head of institutional trading at D.A. Davidson in Portland, Ore. "There's nothing new, nothing on the horizon, to change the psychology of portfolio managers, which is very negative. I don't see any turnaround."
Maybe the only new development today was that the selling pressure was focused on previously "safe havens" such as homebuilders (the S&P Homebuilding Index fell 5.6%), gold miners (the Gold & Silver Index fell 6.6%) and stocks such as
, which stumbled 6.6% to $46.31 after having breached
technical support at $50 on Friday. Elsewhere, the so-called Baby Bells were thrown out with the proverbial bath water, with
down 18.1% after reporting lackluster second-quarter results.
fell 10.2% in sympathy.
Financial stocks also were hammered amid concerns about fallout from the WorldCom bankruptcy and the latest revelations of malfeasance;
fell 11% amid
The Wall Street Journal's
reports on its role in disguising Enron's debt and the NASD's action against telecom analyst Jack Grubman. The Philadelphia Stock Exchange/KBW Bank Index fell 4.3%, as did the Amex Broker/Dealer Index.
Despite the carnage, Volk agreed with other veteran traders that today's action is more akin to the 1970s ("continued erosion") vs. anything resembling the Oct. 19, 1987 crash, as
discussed earlier. Today, for example, the CBOE Market Volatility Index traded as high as 49.67 before closing up 11% to 48.23 vs. its all-time high of 172.79 on Oct. 20,1987 (and peak of 57.31 in September 2001.)
Bear Fur Gets Singed
Another familiar element of today's session was the now-rote attempts by various gurus to try to pick the bottom in equities.
Thomas McManus, equity portfolio strategist at Banc of America Securities, lowered his 12-month price target for the S&P 500 to 1000 from 1150 today and cut his target for the Dow to 9400 and the Comp to 1650. Nevertheless, "we expect to be committing more of our reserves to the market soon," McManus wrote this morning.
"The persistence of the market's downturn is surprising, especially in the face of sharply lower treasury yields," he continued. Today, the price of the benchmark 10-year Treasury note rose 17/32 to 103 8/32, its yield falling to 4.45%.
McManus remains one of the more defensively postured Wall Street strategists; even after adding 5% to his recommended equity allocation on
July 15 and June 10, he recommends only a 60% weighting in stocks.
The irony is the market's most recent swoon has caught even some
previously bearish observers off-guard.
"We have already tried to 'nibble' twice at the long side in recent weeks, anticipating at least a modest reversal of fortune, and have twice beenwrong," admitted Alan Newman, the notoriously bearish editor of H.D. Brous & Co.'s
. "That prices have kept on falling is both unexpected and bearish, not bullish ... there is a possibility that the stock market is already in the midst of a veritable crash."
The oversold condition "warrants some improvement" in equities, but "it will be short-lived," he continued, predicting the upside will be limited to a maximum of three weeks and gains to between 5% and 8%. "We still feel the odds favor additional downside to come into late September,
so we cannot yet turn bullish for the intermediate term."
Even John Roque, senior analyst at Arnhold & S. Bleichroeder, who, as
subscribers know, has persistently resisted the temptation to cry 'bottom' in the past two years, issued a note Thursday that suggested: "There should be a rally soon." (I was traveling Thursday and Friday, hence today's follow-up.)
Roque, who nevertheless maintained a long-term defensive stance, observed a number of contrarian indicators suggesting a near-term rally, including multiple news stories and cartoons about the bear market and corporate greed. He also noted only 11.8% of the S&P 500's components were trading above their 200-day moving averages and just 3.8% above their 50-day average heading into Thursday's session. (Heading into Monday's session, the comparable levels were 4.4% above the 200-day and 1.2% above the 50-day.)
"These numbers are worse than the Sept. 1998 and Sept. 2001 periods," he wrote. Although Roque's data go back only to 1995, "we figure a number close to zero is pretty bad no matter what type of a market we're in."
Today, the analyst said he wrote that note on Thursday because the percentage of S&P stocks trading above the 200- and 50-day moving averages suggested "either we rally or we crash, and I don't use that term lightly."
Roque was referring to the term "crash," but recent action suggests market participants ought to consider using the term "rally" with similar reticence.
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.