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Once promising week implodes on Wall Street
Saturday, March 10, 2001 By Lisa Singhania, The Associated Press
NEW YORK -- For a few hours this past week, Wall Street got a mild reminder of the euphoria that sent stocks roaring last year to some of their highest levels ever. Goldman Sachs chief investment strategist Abby Joseph Cohen issued a research note Wednesday advising clients to buy and predicting the Dow Jones industrials would hit 13,000 by year's end.
But the reaction was muted, an illustration of just how much has changed since this time a year ago, when the Nasdaq hit its all-time high of 5,048.62. Although stocks moved up somewhat, a string of earnings warnings and downgrades quickly took back control of the market yesterday, led by No. 1 computer chip maker Intel's warning that revenue would fall 25 percent in the quarter and that corporate earnings will deteriorate for several more quarters.
The huge networking concern Cisco Systems piled on later in the day, saying it would cut up to 5,000 full-time workers, or about 11 percent of its work force, because of the weakening economy. And the government added to the market's woes with a stronger-than-expected jobs report for February, which some feared could douse hopes for more aggressive interest rate-cutting action by the Federal Reserve.
The result was a steep across-the-board sell-off yesterday as both blue chips and technology stocks tumbled precipitously. The Dow Jones industrial average fell 213.63 points to 10,644.62, though it remained up 178.31, or 1.7 percent, for the week.
The Nasdaq composite index tumbled 115.95, adding to Thursday's losses and further offsetting gains early in the week. It ended the week off 64.85, or nearly 3.1 percent, at 2,052.78, a level not seen since December 1998. The Nasdaq is now down 59.3 percent from its all-time closing high, reached a year ago Saturday.
The Standard & Poor's 500 ended the week off 0.76, a decline of nearly 0.1 percent, after closing yesterday at 1,233.42, off 31.32 on the day. And the the Wilshire Associates Equity Index -- which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues -- ended the week at $11.331 trillion, off nearly $43 billion from the previous week. A year ago the index was nearly $11.374 trillion.
So much for all the bullish talk earlier in the week.
"I've heard of Abby Cohen and I've seen her on TV, but I don't really listen to her much," said Kathleen Greer, a bank customer service representative in Chicago. She worries that some analysts may be promoting the same stocks their firms underwrite or want to do business with. "My investment club uses its own tools to analyze stocks."
The superstar strategists, including people such as Cohen, Merrill Lynch's Henry Blodget and Morgan Stanley's Mary Meeker, can still be found on TV and in newspapers. But their influence has lessened as individual and institutional investors, scarred by weak earnings and the shuttering of dot.coms, have moved away from sectors that ignited many of these analysts' careers.
"It's definitely quieted down," said Robert B. Walsh, a financial adviser in Jersey City, N.J., who used to regularly field calls from clients interested in stocks they had seen touted on TV. "People still listen to that stuff, but they've lost a lot of wealth and don't have the money to go back in."
The unexpected earnings warnings from Intel as well as Yahoo! earlier in the week were a reminder of how fundamentally attitudes and expectations have shifted on Wall Street. Caution, not euphoria, is the rule now.
"Making money is hard again," Blodget was quoted in the New York Post as telling a Merrill Lynch Internet Conference audience this week.
Blodget, a Merrill Lynch analyst, rose to fame three years ago on a prediction that Amazon.com's stock would double. Since then Amazon's stock has fallen sharply and Pets.com, one of Blodget's high-profile stock picks, has shuttered its doors.
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