Investors concede market to bears
Associated Press
NEW YORK — Just what is a bear market?
Most brokers on Wall Street will tell you it's when a major stock index closes down 20 percent from its peak.
By that measure, the Dow Jones industrial average flirted with bear territory yesterday. The Nasdaq composite index has been there for months and is 62 percent off its peak, while the Standard & Poor's 500 index is down nearly 27 percent.
Academics don't subscribe to the 20 percent rule of thumb, preferring phrases such as "a big drop" or "an extended decline" in stock prices.
Regardless, there's consensus that the bears have moved into what for more than a decade had been the bull's pasture.
"You know the old saying about good art — 'I know it when I see it,"' said Jim Angel, an associate professor of finance at Georgetown University in Washington. "Well, with the Dow within spitting distance of 9,000, it's certainly not a bull market anymore."
The Dow closed yesterday at 9,389.48, down 19.9 percent from its record high of 11,722.98 on Jan. 14, 2000. For much of the day it was below 9,378 — official bear territory.
The terms "bear" and "bull" have been used in the securities world since the early 18th century, when stock trading became popular in London, according to research compiled by the Museum of American Financial History in New York.
The two critters were seen as opposites — bears claw fruit and honey down from trees while bulls toss opponents skyward with their horns.
What has brought the bears back to the U.S. stock markets is the weakening economy, which some analysts fear could slip into recession despite three moves by the Federal Reserve this year to lower interest rates.
"We are in the midst of a profit's recession," said Mark Vitner, an economist at First Union Corp. in Charlotte, N.C. "It is a period of below-potential economic growth, where the unemployment rate increases and corporate profits decline."
There have been a number of bear market "blips" in recent years — in 1998 because of turmoil in the Russian economy, in 1997 amid the Asian economic crisis and in 1989, ahead of the Gulf War.
But analysts say that the last time the bears really held sway on Wall Street was in 1987, when the stock markets turned down amid soaring interest rates and rising inflation.
Richard Sylla, a professor of economics and business history at New York University's Stern School of Business, believes that the bear market of 1973-74 "was more similar to what we're experiencing now," in part because of the role oil is playing.
Back in the early 1970s, oil prices rose sharply because of the Arab oil embargo. Oil prices again have been on the rise because of production cutbacks by the Organization of Petroleum Exporting Countries.
Most economists don't expect the market to recover until there are signs that the economy is strengthening.
"If the (economic) downturn is short and sweet, then this will be a bottom or close to it," said Charles Jones, a professor of finance at Columbia University in New York. "If it stays nasty, we're still looking over the cliff."
He pointed out that analysts "initially were saying the economy will be back in the second half of this year; now they're talking about 2002."
His definition of a bear market? "When it hurts to look at the stock tables in the newspapers in the morning."
