- The Washington Times - Friday, March 23, 2001

NEW YORK (AP) Despondent investors intensified their sell-off of blue-chip stocks yesterday, accelerating the decline in the Dow Jones Industrial Average and sending the stock market's best-known indicator into bear market territory for much of the session.

A last-hour rally allowed the Dow to recover somewhat, but the index closed with a loss of nearly 100 points.

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Investors are in "deep despair," said Hugh Johnson, chief investment officer for First Albany Corp. "There is a sense of giving up. They are extraordinarily depressed and demoralized."

The Dow, which dropped by triple digits in six of the past nine trading sessions, tumbled to the 9,379 level in the opening minutes of trading, putting the blue-chip index down more than 20 percent from the closing high of 11,723 it reached on Jan. 14, 2000. A decline of 20 percent is considered a bear market.

The Dow continued to slide in heavy late-afternoon trading, falling more than 380 points. It regained some ground in the final hour and closed down a more moderate 98 at 9,389.

Yesterday's loss means the Dow, which last week suffered its worst-ever weekly point drop, has fallen 1,469 points, or 13.5 percent, over the past 10 trading sessions.

Broader market indicators were mixed.

The Nasdaq Composite Index, down more than 62 percent from its high of 5,049 reached March 10, 2000, advanced 67 to 1,898.

The market's broadest measure, the Standard & Poor's 500, finished down five points at 1,118, having made a last-minute recovery of its own. The S&P; 500 has lost more than a quarter of its value since peaking at 1,527 a year ago.

Despite the late recovery, the market's litany of grim numbers "points out how much damage has been done, and how we have gone from irrational exuberance to irrational depression," said Alfred E. Goldman, director of market analysis for A.G. Edwards & Sons in St. Louis.

According to traditional measures, a bear market occurs when there is a drop of 20 percent over a sustained period. While the tech sector landed in bear market turf last year, Wall Street has been debating whether the broader market has also become bearish or has just dipped into bear territory. The S&P; 500 officially entered a bear market March 12.

The Dow, which until last week was able to resist the heavy selling that decimated the Nasdaq, has fallen because investors believe the economy is getting weaker, hampering even the most stalwart companies.

"This is about a market that is forecasting a recession," said Gary Kaltbaum, market technician for First Union Securities. "I know a lot of people are saying we are not in a recession, but remember, 12 months ago people were saying technology was great and wasn't going anywhere but up."

The Dow was able to curb its losses as the Nasdaq advanced on a rebound in deeply discounted tech stocks. Still, Mr. Kaltbaum said, it's doubtful the Dow will be able to sustain a recovery for quite some time.

"You had to bounce from somewhere," he said. "The Dow is in bad shape no matter what."

The Dow began its plunge last week when the market's fears of a recession widened to include the possibility of a halt in growth globally, especially given news that Japan is in a state of deflation and that the country's banking system is burdened by debt.

Investors also remain irritated by the interest-rate cut the Federal Reserve made Tuesday. Investors, who wanted the Fed to reduce rates by an unprecedented three-quarters of a percentage point, don't think the half-point reduction will be enough to boost earnings and the economy.

Among blue chips hurting yesterday was Procter & Gamble, down 45 cents at $62.75, after confirming earlier reports that it is slashing 9,600 jobs as it tries to restore long-term growth.

General Motors skidded $1.22 to $52.30 after announcing plans Wednesday to briefly idle more North American assembly plants in the next three months as it winnows inventories.

A new report showing the economy has further slowed added to investors' sour mood.

Economic activity fell 0.2 percent in February, according to the Conference Board. The New York private research group said its Index of Leading Economic Indicators fell to 108.8 last month after increasing a revised 0.5 percent in January.

The group provided little encouragement that the economy would rebound soon but it did say slow growth would continue in the coming months.

The Labor Department reported Thursday that initial applications for jobless benefits edged down by 1,000 to a seasonally adjusted 379,000 for the week ending March 17. Despite the drop, the figures were interpreted as showing a continuing drop in demand for workers.

Declining issues outnumbered advancers nearly 3 to 1 on the New York Stock Exchange, where volume was very heavy at 1.72 billion as of 4 p.m., compared with 1.31 billion at the like time Wednesday.

The Russell 2000 index, which tracks the performance of smaller companies' stocks, was down 2.94 at 432.80.

Overseas, Japan's Nikkei stock average closed down 1.9 percent.

Stocks dove even further in Europe. Germany's DAX index fell 4.2 percent, Britain's FTSE 100 declined 4.1 percent and France's CAC-40 closed down 4 percent.

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