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Markets Bounce Off Lows in Severe Sell-OffAired April 4, 2000 - 2:05 p.m. ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DONNA KELLEY, CNN ANCHOR: We watched a substantial tumble earlier in the day on the markets, both the Dow and the Nasdaq. There has been some recovery since. We want to join our sister network, CNNfn, and anchors Kitty Pilgrim and Charles Molineaux.
CHARLES MOLINEAUX, CNN ANCHOR: CNN viewers welcome. This is CNNfn, the financial network. Ongoing coverage of the severe plunge in the Nasdaq technology-related stocks.
KITTY PILGRIM, CNN ANCHOR: Just to bring our viewers up to speed, the Dow started the day in positive territory, but then soldoff quite heavily, down 504 points. The Nasdaq started the day in negative turf, and it got quite severe. The selling was down 574 points, 26 percent down from the record high.
MOLINEAUX: Let's get the latest on this market, which looks like it is in a classic panic selling and capitulation mode. We are seeing a severe drop in technology shares on very, very heavy volume.
John Metaxas at the Nasdaq marketsite right now -- John.
JOHN METAXAS, CNN CORRESPONDENT: Well, actually, an hour ago we were looking at an historic decline in the Nasdaq. The Nasdaq was down some 13 percent. That more than it was down the day of the great crash in 1987, when the Nasdaq, which was a very different animal back then, was down 11 percent. But in the last hour, we've actually come up 300 points from the low. It still is a sharp sell off, we are down some 273 points, a loss of more than six percent, but that's a far cry from the 13 percent it was about an hour ago.
Still a very negative day. Some of the big leaders in the market like Cisco Systems down more than three percent. Microsoft with some substantial declines as well. And if we look at a chart at what the Nasdaq's done for the year, you can see that great rise from about the 4000 level at the beginning of the year all the way above 5000.
Well, in the last few weeks, we've come all the way back down to about this level here. We've dissipated all the gains for the year and today at one point giving up more than 570 points down through 4200, 4100, 4000, all the way down below 3700. So six century marks falling today, but the buyers are starting to step back in at this point, and we need to wait to see what kind of close we will get to see if this is short-term, temporary buying, or whether the market has reached its bottom and is starting to come back. At least the selling has calmed down for the time being.
PILGRIM: John one quick point, though, I was looking at our charts, and we smashed down through 4000 on the way down, but we had only attained that February 1. So this run up in the Nasdaq has been quite severe, and quite accelerated. And so we're going down through levels that we only attained several months ago.
METAXAS: You know, the volatility has become so much greater in the stock market over the past few months that some people see this as a normal correction. When you have had the technology stocks gaining more than 100 percent in a very short period of time that is a very strong gain, the correction from that gain is going to be very severe one. That's what we've seen yesterday and today and even with some of the selling last week. It has been a very severe scary correction in the mist of it, but it won't be until afterwards, a few days, weeks, months, when we look back on it, when we will know how severe it will have been in retrospect, or whether it was just a retracement of some of those great gains.
MOLINEAUX: John, of course, a major consideration when you're seeing any major moves in the composite is what we refer to as the market breadth, the number of stocks going up versus the number of stocks going down. We the stocks going down leading those going up by a seven-one margin.
But what about the individual sectors. Are any of them being spared or any of them holding up better than what we are seeing the overall Nasdaq composite doing?
METAXAS: As I look over to my right here, and they are on the screen over there. They are all down, transportation is near break even. But we have got biotech down seven percent; telecommunications down eight percent; finance down nine percent; so the selling has been across the board pretty much today, Charles.
PILGRIM: All right, thanks very much John Metaxas at the Nasdaq marketsite. We will give you a minute, John, to regroup and we will be checking back with you.
In the meantime, we are joined by Frank Gretz of Shields and Company for a little perspective of what's happening in the markets.
Frank, we seem to have recovered from the lows. We were down 574 points. We are now 268, which on the way down looked like a scary number, but on the way back looks like a relief.
FRANK GRETZ, SHIELDS & COMPANY: Well, that is a good sign. I mean, after all, the market reached an extreme on the downside, at least to some extent today, you would think just by virtue of its ability to rally, always a good sign. Also, the other good sign is markets do tend to be volatile when they make lows. I mean. even if we don't hold this rally, we can sell-off again sometime this afternoon, that's not such a bad sign. Volatility is the sign of a low. Getting the heavy, heavy volume that we're seeing today is another good sign of a low. Seeing a lot of decliners relative to advancers there is very little left standing so to speak, very little that is left on upside, that's another good sign.
MOLINEAUX: Now, one thing that a number of strategist found very worrisome on the way down was the lack of any credible attempts at a rally, and the selling that seemed to perpetuate itself. Now we have seen what could be some kind of a bounce. Let's see if we do in fact fall back from this level that we have attained at this point. But does the fact that this happened at this point have a lot of significance?
GRETZ: Well I think you have to remember that you know we did go up much in the same way. So there's this almost a symmetry to the way the market is acting here. You know, we went up on the handful, now we are coming down by the handful.
You know, I don't think I would be so concerned about that. This is a market, especially in the tech sector, where there isn't a lot of liquidity. I mean, when you buy these stocks, they go up by the handful, and when you sell these stocks there is often not a lot of liquidity. And it's just the nature of the beast, and it is something we have to live with. Unfortunately, you know, it is a lot nicer when it is going up than when it is coming down but we just have to live with that too. Getting some lift here. I think it is finally a good sign.
MOLINEAUX: Is this the point at which you have to start worrying about tuck fund redemptions?
GRETZ: Well, I think you have to worry about margin calls, and tech fund redemptions is another form of margin calls..
MOLINEAUX: But that is a longer term version of it. I mean, margin calls obviously happen over an extremely short period of time.
GRETZ: Well, still, people can liquidate their funds overnight and, you know, that's just another form, I think, in a sense of a margin call, but, yes, I think there is a problem there, and especially the problem is because, as I understand it, most funds don't have a lot of cash reserves.
So you know, there could be some forced liquidation. I mean, it happened not so long ago, I mean, a month ago people were talking about that in the value funds. People didn't want to sell their nice food stocks or whatever, but they had to because they have liquidations. Certainly, it could happen in the tech sector.
PILGRIM: All right, Frank Gretz of Shields & Company.
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