Friday, March 09, 2001

Nasdaq's year: Euphoria to fear

Analysts say index testing bottom of 2,000

By Amy Baldwin
The Associated Press

        NEW YORK — Last year, when Bill Mohrmann wanted a crimson-red, fully loaded Harley Davidson motorcycle, he turned to the stock market and got a wilder ride than he'd expected.

        Six days after turning over some money to his day-trader son, he had the bike — and expectations that more easy money was ahead. But today, only $10,000 of Mr. Mohrmann's original $100,000 investment remains.

        “It was almost a sure thing,” he said. His attitude was widespread. Overlooking steep stock prices and earnings that in many cases were nonexistent, investors propelled the Nasdaq Composite Index to a record close of 5,048.62 on March 10, 2000.

        Twelve months later, the index has dropped 57 percent, hovering near a low not seen in more than two years. Put another way, the Nasdaq Stock Market is worth about $3 trillion less than a year ago.

        Like a lot of other investors, Mr. Mohrmann wants to know: When will the Nasdaq bounce back?

        That's the trillion-dollar question on Wall Street. Many analysts think that the Nasdaq is testing a low around 2,000 — it closed Thursday at 2,168.73 — but there's less certainty about when it will rebound.

        Many market observers are convinced that technology will continue to drive stock prices, economic growth and investors' confidence.

        “As goes the Nasdaq, so goes investors' sentiment; and as goes investors' sentiment, so goes the economy,” said John Edmunds, a finance professor at Babson College in Wellesley, Mass.

        Fear and caution have replaced the euphoria that ruled the mar ket a year ago — reflecting a weaker economy and consumers with less money to spend. Consumer confidence has plunged to levels not seen since the summer of 1996, while the litany of companies that have cut jobs, reduced profit forecasts or shut down has further depressed Wall Street.

        “The stock market is the economy,” said Ricky Harrington, a technical analyst for Wachovia Securities. And the Nasdaq “represents the hot money, what the public has been paying attention to. They have been paying attention to Amazon and Cisco and Intel and not Minnesota Mining & Manufacturing and du Pont.”

        Investors now are putting their money in safer investments. This year, investors have been bidding up blue chips, such as drug stocks, which has helped keep the Dow Jones Industrial Average strong. The benchmark index is off only about 7 percent from its record high of 11,722.98 on Jan. 17, 2000.

        Even as tech stocks have crumbled in the past 12 months, many Dow stocks have advanced, including Philip Morris Cos., up 167 percent, and Johnson & Johnson, up 38 percent. Meanwhile, chip maker Intel Corp. , one of the Dow's tech components, has slid 72 percent, and software make Oracle Corp. has plunged 79 percent.


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