Confident in US stocks amid a worldwide market slump, small investors kept buying as the Dow average shed 481 points in its worst week since the mini-crash of October 1989, money flow statistics show.
"If you look at the best indicator of the market, it's money flowing to Dow stocks, and you see money flowing in," said Laszlo Birinyi, the head of Greenwich, Connecticut-based research firm Birinyi Associates.
Small institutions, corporate officers, market makers and the specialists have "continually shown up buying, and that's the kind of thing that we have seen at other critical correction period points the last 10, 15 years," said Birinyi.
For the week, the Dow industrials dropped 5.7 per cent. The Standard & Poor's 500 Index fell 5 per cent. The Nasdaq Composite Index, dominated by computer-industry shares, lost 8.8 per cent. The Dow average, up 18 per cent for the year six weeks ago, is now just 144 points away from losing its entire 1998 gain.
As investors sold stocks around the world, they bought US government bonds. Yields on the benchmark 30-year Treasury fell to 5.28 per cent early on Friday, the lowest since the US started regular sales of the securities 21 years ago. The low yields will be good for stocks, investors said.
Some top US securities firms, stung by losses in Russian debt and concerned that even the "A"-rated bonds of US companies will depreciate, are increasingly skittish in their traditional role as market makers for corporate bonds, investors say.
Wall Street's big traders are "hiding under the desk right now," reducing their purchases of bonds from money managers, said Michael Gardner, who helps manage $30bn of fixed-income securities at State Street Research & Management in Boston.
While government bond markets in Europe and the US are having one of their best years of the 1990s, US corporate bonds are suddenly perilous to hold. Russia's default on its rouble-denominated debt prompted traders to discount the bonds of some developing nations by about 70 per cent - leaving investors with millions of dollars in losses and paring the value of the safest bonds investment banks hold in inventory.