Markets devastated in 2001
| • | Mutual funds see sharp dropoffs |
By Lisa Singhania
Associated Press
There won't be any fond farewell to 2001 for most investors, who are only too happy to put the painful and difficult year behind them.
Associated Press
Stocks fell to unimaginable lows in a bear market worsened by terrible corporate earnings, a recession and a terrorist attack that targeted Wall Street.
Clerks worked the eurodollar pit at the Chicago Mercantile Exchange amid a sea of confetti at the close of the last trading day of 2001.
The three major market indexes ended the year significantly below where they started — the second straight loss after a devastating 2000 performance.
The last, and only, other time all three indexes have fallen two years in a row was in 1973 and 1974, when the country was engulfed by recession and an energy crisis. The Dow did have a losing streak of its own in 1977 and 1978.
Here's a look at some of the 2001 statistics many investors can't wait to forget:
• The Dow Jones industrial average: The Dow fell more than 7 percent, or 765.35 points, to end the year at 10,021.50.
Analysts said continued declines in technology stocks, including Hewlett-Packard, were to blame — as well as losses in more traditional companies, such as Merck, whose stock price had climbed in 2000 as investors looked for less-risky buys.
• The Nasdaq composite index: The technology-focused index took another hit, sliding more than 21 percent or 520.12 points during the year to close at 1,950.40. The decline was severe, but not as painful as in 2000, when the index lost nearly 40 percent of its value. Investors punished tech stocks when the sector failed to live up to expectations of a midyear turnaround.
Late in 2001, Wall Street appeared to give the sector another try, though. The index rebounded 37 percent from the selloff that followed the Sept. 11 attacks. Some big-cap tech stocks, including Microsoft and Intel, actually ended the year higher. But analysts were cautious about reading too much into the rally.
"Part of it was a makeup rally for the losses after 9-11, and about 10 percent of it was actually a legitimate rally as Wall Street began expecting a recovery in 2002," said Charles Pradilla, chief investment officer at SG Cowen Securities.
• The Standard & Poor's 500 index: The broadest measure of big-cap stocks tumbled 13 percent, or 172.20 points, to 1,148.08 in 2001. Again, the culprits were losses in technology and pricey non-tech issues.
The poor performances are especially striking given that less than two years ago, all three indexes had reached their all-time high closes. The Dow has fallen 14.5 percent from its 11,722.98 peak in January 2000; the Nasdaq has tumbled 61.4 percent from the 5,048.62 level reached in March 2000; and the S&P has lost 24.8 percent since making its high of 1,527.46 in March 2000.
Beyond the big-cap stocks of the Dow, Nasdaq and S&P, the market's performance was also weak — although stock size did matter.
Small-cap and mid-cap indexes, which focus on companies with more modest market capitalizations, fared better than their larger counterparts in many cases.
The Russell 2000 index, which tracks smaller companies, managed a small gain, ending the year up 1 percent or 4.97 at 488.50.
The American Stock Exchange S&P Midcap 400 index, which follows more medium-sized companies, finished down just 8.45 points or 1.6 percent at 508.31.
Several individual stocks also made news this year.
Although there were fewer dot-com stocks to go out of business this year, investors didn't hesitate to sell technology stocks that they feared were overvalued or would disappoint in the short term.
Sun Microsystems closed yesterday at $12.35, less than half of where it began 2001. Cisco Systems, another tech darling, dropped by more than half to close the year at $18.11.
Cisco Systems, another tech darling, dropped by more than half to close the year at $18.11.
Wall Street was also severely shaken by the downfall of Enron, which plunged from nearly $80 at the beginning of the year to 60 cents yesterday.
The energy company, which had been on many stock picker's lists at the beginning of the year, imploded after a loss of confidence by investors forced the company into bankruptcy court.
"This has been a very difficult year for everyone," said Bill Barker, investment consultant at RBC Dain Rauscher. "But I'm hopeful that we're not doomed to repeat our mistakes of the last few years. People are a lot more cautious now than they were before."
