After Strong Start, Stocks Close Mixed

By Carol Vinzant
Washington Post Staff Writer
Appeared in The Washington Post, Friday, March 16, 2001; Page E01

NEW YORK, March 15 -- Exhausted investors took a breather today, doing selective bargain hunting and selling on the peaks.

A surge in Japanese stocks overnight set the stage for a strong opening, but the rally soon lost steam. The Dow Jones industrial average ended the day with modest gains, while the Nasdaq closed down.

"There was no staying power, no gusto behind the original spurt. People were looking for the next wave of buyers and there really weren't any," said Tony Cecin, senior managing director and head of equity trading at U.S. Bancorp Piper Jaffray.

Mike Clark, global head of equity trading at Credit Suisse First Boston, characterized today as "selling exhaustion." He said investors are convinced that some kind of bad news is just around the corner and therefore they have little incentive to dive back into the market.

The Nasdaq composite index closed at 1940.71, down 31.38 points, or 1.6 percent. The Dow Jones industrial average gained 57.82 points, or 0.6 percent, to close at 10,031.28.

The Standard & Poor's 500-stock index rose 6.85 points, or 0.6 percent, to close at 1173.56. The S&P 500, which measures a broad range of stocks, is down about 23.6 percent from its peak, below the 20 percent drop that is generally considered a bear market.

"We are in a zone right now where every rally seems to be met with sellers -- people who are thinking 'I wish I would've gotten out before now,' " said Mike Jones, president of Argent Investment Services, a Louisiana-based registered investment adviser and broker-dealer that manages $875 million. "As soon as we get a rally, they say, 'Let me get some money off the table.' "

Friday may be another volatile day with heavier trading because it is triple-witching day -- a day that occurs once every quarter when all options and futures contracts change hands. That causes a surge in volume and huge price swings, although over the past year the impact has lessened because traders often swap out of contracts early to avoid the rush, Cecin said.

Investors must also digest a warning from Compaq, which announced after the market closed today that its first-quarter profits will be below analysts' estimates. The computer company announced it would cut 5,000 jobs and that its chief financial officer is being replaced.

The producer price index, an early indication of inflation, is due out before the market opens as well. When the number came out unexpectedly high for January, the market slumped on fears that it would discourage the Federal Reserve from lowering rates.

"Everyone's going to home in on the statistic du jour, whatever it is, and overemphasize its importance," Cecin predicted.

Although tech stocks have taken a beating for months, this week blue chips were aggressively sold off too. "This was not a good week for the value players and the people investing outside of technology," said Barry Hyman, chief investment strategist at Weatherly Securities, which manages $500 million, mainly for wealthy clients.

"This week was a crude blow, because many of these stocks have dropped 15 to 20 percent, which just makes the whole market look vulnerable," Hyman said. For months, the sell-off was largely concentrated in the tech sector.

Banking stocks such at Citigroup and J.P. Morgan recouped most of their losses from Wednesday, on the heels of news out of Japan that government officials were taking steps to shore up their financial system.

Intuit, which makes personal finance software such as Quicken and TurboTax, said slower Internet advertising and software sales will reduce expected third-quarter profits. Intuit stock fell 29.4 percent to close at $29.81.

Oracle fell 8 percent, to $14.75, in anticipation of earnings problems. After the market closed, the company said it met analysts' expectations, which had been revised down recently.

Investors are focused on Tuesday's Fed meeting, when Wall Street is betting on an interest rate cut. The Fed already cut rates in January twice. The actions gave the market a jolt, but the gains have been erased by weeks of news about weak corporate profits.

Historically rate cuts by the Fed lead to a rise in the stock market, but Robert J. Barbera, chief economist at Hoenig & Co., said he thinks investors expect too quick a fix.

"The anxiety that's currently in the market reflects the fact that in January when they announced the ease, the market soared, but almost every stock that was higher that day is lower today," Barbera said. He noted that the 1974 bear market fell an additional 25 percent after the Fed rate cuts before recovering.

"The mistake that people made [in January] was in believing that rise would be immediate," Barbera said.

Other Indicators

o The New York Stock Exchange composite index fell 5.09, to 598.85; the American Stock Exchange index fell 3.99, to 883.15; and the Russell index of 2,000 small stocks fell 1.53, to 452.16.

o Advancing issues outnumbered declining ones by 8 to 7 on the NYSE, where trading volume fell to 1.26 billion shares, from 1.4 billion on Wednesday. On the Nasdaq, decliners outnumbered advancers by 9 to 8 and volume totaled 1.91 billion, down from 2.09 billion.

o The price of the Treasury's 10-year note rose $3.44 per $1,000 invested, and its yield fell to 4.78 percent, from 4.82 percent late Wednesday.

o The dollar rose against the Japanese yen and the euro. In late New York trading, a dollar bought 122.34 yen, up from 121.03 late Wednesday, and a euro bought 89.74 cents, down from 91.14.

o Light, sweet crude oil for April delivery settled at $26.55 a barrel, up 14 cents, on the New York Mercantile Exchange.

o Gold for current delivery fell to $260 a troy ounce, from $262.50 on Wednesday, on the New York Mercantile Exchange's Commodity Exchange.