Where euphoria use to reign, a frenzied despair, verging on panic, gripped Wall Street at times yesterday as the Nasdaq exchange staged a second dizzying plunge in the wake of the Microsoft anti-trust ruling and the Dow Jones industrial average index suddenly threatened similarly to lose its footing.
For many small investors it was their first encounter with a bear market. The shockwaves, and the pain, rippled across America, which in recent years has become a nation of stockholders. Much of the country was suddenly feeling less wealthy and less sure about its mutual funds and retirement plans. But by mid-afternoon, there were signs that investors were moving back in to pick up cheap stocks and the worst of the losses would be pared.
Hi-tech stock in London suffered a similar, if less severe, retreat, dragging the FTSE 100 to a four-week low. The tech-heavy UK techMARK index sank more than 350 points to close at 3,731 points. High-profile victims included the raft of New Economy stocks that recently gained inclusion in the FTSE 100 index and the Web-based retailer, lastminute.com.
Brokers said the sell-down was inspired both by the the ruling, issued late on Monday in Washington DC, on Microsoft's violation of anti-monopoly laws, and by investors' concerns over the sky-high valuations that the sector has attracted.
Anxious passers-by were gathering yesterday outside the Nasdaq exchange's giant ticker wall on Times Square in New York to absorb the gravity of what was happening inside. The Nasdaq is home to most of the hi-tech and internet stocks that until recently had been so hot.
Most seemed determined to remain calm. "I am not too worried and I am just looking for the bottom, then this may turn out to be another buying opportunity," noted Brian Haber, who was at the window. He expected his Microsoft shares to pick up again.
Hopes that the Nasdaq might have managed a limited recovery after losing 7.3 per cent of its value on Monday were dashed in morning trading yesterday. By the lunch hour in New York it had slipped another 11.25 per cent to below 3,749 and was more than 20 per cent off its all-time high of 5,0848.62, hit on 10 March. It was shaping up to the be the worst day in the Nasdaq's short history.
Several recently floated hi-tech companies were being torn apart. Electronic share-dealing firms were among the worst hit. Where so many of these companies have been used to making daily double-digit gains, yesterday they saw frightening double-digit losses. The electronic Nasdaq tickers were nearly all flushed with red.
Nerves were further frayed by a parallel slide on the Dow Jones. Home to most of the old-guard blue-chip companies, it resisted the hi-tech slide and rose by 300 points on Monday.Suddenly at mid-morning yesterday, it seemed to succumb to the Nasdaq virus and begin its own swoon. Three hours before the close it was off by 416 points, or about 3.7 per cent.
Trading curbs were repeatedly activated on the exchanges as brokers scrambled to cope with one of the most frantic days in recent memory. The sell-off was being exacerbated as investors faced margin calls on their stock holdings, giving them no choice but to sell. By 1pm the Nasdaq index, which opened the year at 4,069, was below 3,700.
How much further can Wall Street fall? Nobody knew last night. One thing that is for sure, however, the worry that the Federal Reserve has repeatedly expressed, that the markets in the US have been wildly overpriced, will now be eased. Pressure on Alan Greenspan to raise interest rates further is similarly likely to recede, analysts noted.Reuse content