Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, July 20, 1995 TAG: 9507200064
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE:
DATELINE: NEW YORK LENGTH: Medium
In addition to the flight from technology issues, the market retreat also was tied to a sharp drop in bond prices, which pushed interest rates higher.
The Dow Jones industrial average closed at 4,628.87, down 57.41, but only after trimming a loss of more than 133 points sustained around 2 p.m. Despite the dramatic fall, the market's best-known index still was nearly 21 percent above the level it held as the year began.
Trading set a record of more than 597 million shares on the Nasdaq Stock Market and was heavy at more than 24 million shares on the American Stock Exchange. The combined trading, which includes 590 million shares of NYSE-listed stocks on the Big Board and other exchanges, exceeded 1.2 billion shares. That surpassed the stormy sessions during the market's 1987 crash.
Some market players had been predicting that the stock market was poised for a significant slide, saying it could not sustain its current lofty levels. Major indexes have gained more than 20 percent so far this year, led by a technology sector which seemed to have no top.
``This market is ridiculously extended,'' said Peter Anderson, chairman and chief investment officer at IDS Advisory Group in Minneapolis.
But the suddenness and severity of Wednesday's selloff were a rude surprise to analysts and traders, many of whom came back from a lunch break to find the market sinking rapidly.
``This doesn't almost take your breath away - it does take your breath away,'' said Hugh Johnson, First Albany Corp.'s market strategist. ``You can point to some fundamentals, some rational reasons for this, but nothing explains the magnitude of this decline.''
Broad-market indexes, which are heavily weighted in technology shares, were pummeled.
Technology stocks extended a slide that began Tuesday, when Intel announced slightly disappointing second-quarter earnings, and after Microsoft issued warnings about its Windows 95 software and other issues. Both issues were big losers in Nasdaq trading Wednesday, with Intel down 73/8 to 657/8, and Microsoft off 73/8 to 941/2.
Technology stocks on the Big Board also sustained heavy losses. IBM dropped 53/4 to 1011/4; Motorola slid 25/8 to 727/8; Micron Technology lost 25/8 to 573/8 in leading volume on the NYSE.
``I don't think we're going into a bear market,'' Anderson said. ``What would make that assumption wrong is if interest really soars, up to 8 to 81/2 percent."
As long as 30-year Treasurys remain close to their current level, below 7 percent, the stock market should take a mild correction in stride, Anderson said.
by CNB