Sunday, March 25, 2001

'Buyers' strike' afflicts market

Investors' caution indicates long wait before prices climb

By Amy Baldwin
The Associated Press

        NEW YORK — When the Dow Jones Industrials Average skidded into bear-market territory this week, the message on Wall Street was clear: There are no safe havens in the stock market.

        What's more, market watchers say, investors might as well hunker down and settle in. It could be a long time before stocks move higher.

        “There isn't so much a sellers' mentality out there as a buyers' strike,” Tony Cecin, a trader for U.S. Bancorp Piper Jaffray, said. “People are going to keep their hands in their pockets until they see the sun shining again.”

        No one on Wall Street is forecasting anything but gloom for the foreseeable future. But what else can be expected if even the pillars of corporate America are suffering?

        Taking a beating similar to what tech stocks previously endured, the Dow plunged 1,139.84, or 10.7 percent, in the past two weeks.

        Only a last-minute spate of buying Thursday managed to keep the Dow from closing in bear-market territory — characterized by a 20 percent drop from its Jan. 14, 2000, high of 11,722.98.

        That late rally continued into Friday, when the Dow rose 115.30 to 9504.78.

        But analysts say stock prices won't be able to put together a sustained advance, simply because the problems that incited the latest sell-off are still weighing on the market:

        • Investors fear that the 0.5-percentage-point interest rate cut the Federal Reserve made Tuesday won't help reinvigorate the economy in the near term.

        • There's growing uneasiness about the possibility of a global recession that would curb demand for U.S. goods and services abroad.

        • Blue-chip companies have joined high-techs in warning that the economy is hurting business. Cincinnati-based Procter & Gamble, for example, announced Thursday that it is laying off 9,600 employees worldwide on top of the 15,000 it trimmed in June 1999.

        “There really is an air of caution out there,” said Alan Ackerman, executive vice president of Fahnestock & Co.

        “It's not a hiccup; it's a real concern over whether the economy will continue to slow into next year.”

        As investors' confidence in the overall market slips, they see little choice than to bail out of even relatively safe sectors such as drug and consumer product stocks.

        And as Mr. Cecin, the U.S. Bancorp trader, put it, even if investors aren't selling, many aren't buying stocks, either.

        Many cautious investors are dealing with their fears by putting their money in bonds, CDs, money markets or even savings accounts.

        Investors' nervousness is bad news for the Dow, which until now had been seen as quite strong compared to the Nasdaq Composite Index.

        The Nasdaq is down almost 62 percent from the peak of 5048.62 it reached just over a year ago.

        “There is no magic formula here,” Mr. Cecin said. “You have to get the valuations down to where investors feel compelled to buy.”


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