Market Movers: Still Searching for That Bottom

Feb 28 2001

Following Federal Reserve Chairman Alan Greenspan's testimony to Congress Wednesday morning, the financial markets returned to their favorite game: Bottom, Bottom, Who's Got the Bottom?

The Nasdaq closed at 2151.82, territory not seen since December 1998. The tech-laden index dropped 2.54 percent, or 56 points, recovering only slightly from the day's low of 2127.50. The Dow Jones saw another triple-digit decline, falling 141.73 points, or 1.33 percent, to 10495.15. The S&P 500 continued its steep descent, dropping 1.68 percent, or 21.13 points, to 1236.81.

Sellers hit the Street hard, and the interest in major issues was broad. Among the Nasdaq's most active, companies like Cisco Systems , JDS Uniphase , Intel and Microsoft experienced only minor drops. Farther down the list, Applied Micro Circuits , Siebel Systems , Palm , Brocade Communications Systems , Amazon.com and a host of others experienced share-price reductions of 5 percent to 15 percent.

Nor did techs on the Big Board fare any better. Corning fell 5.4 percent, or $1.55, to $27.10 following a drubbing of almost 15 percent on Tuesday. EMC , Lucent Technologies and SBC Communications also each declined almost 5 percent.

Greenspan spoke to the House Financial Services Committee this morning. His testimony removed all speculation that the Federal Reserve Board would cut rates before its scheduled Board of Governors meeting on March 20. "The economy appears to be on a track well below the productivity-enhanced rate of growth of its potential and, even after the policy actions we took in January, the risks continue skewed toward the economy's remaining on a path inconsistent with satisfactory economic performance," Greenspan told the committee. Nonetheless, he feels that an interest-rate shot in the arm is not something the country needs just now.

"The market was disappointed, but the rumors that had been spreading were premature," said Jeremy Siegel, professor of finance at the University of Pennsylvania 's Wharton School of Business. Siegel was referring to predictions made by Bear Stearns economist Wayne Angell late last week and on Monday that a Fed rate cut this week was "80 percent" certain. Banks were anxious for a cut, as were investors in financial stocks. Stocks in that sector were hit on the news of a delay. Citigroup fell 1.24 percent, J.P. Morgan Chase dropped 2 percent, Charles Schwab fell 4.78 percent and Morgan Stanley Dean Witter fell 6.5 percent. "The Fed is supposed to call it like it is and react to economic data," Siegel added. "People are too swept away by the Nasdaq decline."