Investors search for market's bottom

Associated Press

NEW YORK — It felt at first like stocks had perhaps hit bottom this past week — and not just once, but twice.

Then, when the two big routs failed to inspire rallies, it became clear prices still have further to fall.

The steep selloffs — sparked by yet more bad earnings news and fears of a global recession — pushed the Dow Jones industrials below 10,000 for the first time in 27 months and sank the Nasdaq composite index under 2,000 for the first time since October.

And stocks slid even further with the Dow losing 821 points to end the week at 9,823.41, and the Nasdaq falling 161 to 1,890.91.

When such drops fail to demonstrate that the markets have reached "the bottom" that Wall Street has been looking for, investor confidence slips further. That's not going to help the market in days to come, said Brian Belski, fundamental market analyst for U.S. Bancorp Piper Jaffray.

"The biggest problem with the market is that people are continuously looking for a bottom," Belski said.

Stocks failed to rally after the Nasdaq fell below 2,000 Monday and the Dow plunged more than 430 points. Likewise, the market didn't fare better after the Dow lost 317 points Wednesday.

Add to that reports that Japan's economy, the second largest in the world, is in a state of deflation and investors here simply see no reason to buy stocks.

"There is just so much pessimism around and it seems to be growing, which could be a good thing because that often happens at the bottom," said Eugene G. Mintz, financial markets analysts at Brown Brothers Harriman.

But Belski was less confident of a bottom being reached any time soon.

"This is a market that has surprised everybody. Everybody is asking, `When are we going to turn around?" Belski said. "It's not going to be easy."

A longer wait shouldn't surprise people, analysts say, reminding investors that the market in the last year has lost more than $4 trillion. Yet who can blame investors for yearning to feel as rich as they did this time last year, just before the high-flying tech sector started tumbling?

Just wanting the drubbing to end isn't enough. For the market to really rebound — longer than a token session at a time — analysts say it's going to take signs that the economy is getting out of its funk, earnings reports that beat rather than miss expectations and consumers starting to spend freely again.

Earnings warnings, the latest coming late Thursday from Compaq Computer and Oracle, are what's keeping stock prices and consumer confidence down. All it takes to quash a rally is one big-name company warning that business will continue to slump.

"Every time the market gets its feet together, this happens," said Larry Wachtel, market analyst for Prudential Securities.

With healthier earnings, stock prices, economic growth and consumer confidence all dependent on one another, improving all of them is going to take some time — perhaps all year. The market, which had taken comfort in the belief that a reprieve would come in the second half of 2001, now is struggling to cope with a longer-term recovery.

"The real question for this market is, when are earnings going to turn around, and earnings aren't going to turn around until consumers start spending more money," said James Meyer, director of research at Janney Montgomery Scott. "So, I want to see some positive sentiment."

Even reductions in interest rates, with the year's third cut expected Tuesday from the Fed, will take at least six months to lift profits and stock prices.

Although the wait for a market recovery will be longer than expected and a new bull market is even further away, many investors say they're not concerned, because they're in the market for the long haul.

"I don't get caught up in bull market, bear market, recession or whatever," said Jim Nuckols, a 46 year-old tobacco and cattle farmer in Midway, Ky.

"I just have every intention of putting my money where I have it and continually investing in stocks and mutual funds and hope for the best."

For the week, the Dow lost 821.21, eclipsing the 805.71 the blue chips lost during the week ended April 14, 2000. However, the Dow's 7.71 percent slide was only its 44th-biggest weekly drop in percentage terms. The blue chips have now fallen 9.2 percent since they peaked at 11,722.98 on Jan. 14, 2000.