A wave of fear swept through Wall Street on Monday morning, giving the Dow Jones industrial average a 105-point shock. By the time the closing bell sounded, however, buyers had crept out of their bunkers and rejoined the fray.
After a tumultuous day, the Dow closed at 3,179, down 21.61 points from Friday. Over the last three weeks it has lost 176 points, giving up nearly all this year's earlier gains.
Market watchers blamed a combination of worries for touching off Monday's selling spree.
Ralph Bloch, chief market analyst for Raymond James & Associates Inc. in St. Petersburg, ticked off his list: The sour economy means next year's corporate earnings won't be as good as expected. The Federal Reserve Board hasn't reduced interest rates fast enough. And on top of all that, Bill Clinton might get elected president.
"We're going to have the worst of both worlds _ higher rates under President Clinton with no profits," Bloch said. "That's what's staring the market in the face."
He says even good stocks got smashed in the selling because money managers were selling winners to realize gains they could pair with losses.
"Stocks like Philip Morris and Home Depot become a source of funds even if there's not anything wrong with them," Bloch said. "It's the old saying that when they raid the brothel, they take the piano player, too."
However, once stocks had dropped $1 or $2, a lot of
them began enticing buyers.
"I view the market as giving you an unusual opportunity to buy some good stocks cheap," said Sarasota money manager Ray Hines, an economic optimist in a sea of pessimists. "You could see a fairly dramatic change in climate here within a relatively short period of time. It's a dangerous place to get too bearish."
The Fed still might cut interest rates a bit _ possibly at a key meeting of policymakers today. One option would be to cut the discount rate, the interest rate that it charges banks to borrow money, from 3 percent to 2.5 percent.
If that happens, the rate would be at its lowest point in 33 years. Banks, in turn, might lower their lending rates to businesses and consumers.