Tech stocks spring swoon continues

Call it a correction, a bear market or whatever. But the losses are brutal and mounting.<br><br>The once high-flying Nasdaq Composite Index, dominated by U.S. technology companies, dropped 286.27 points

Thursday, April 13th 2000, 12:00 am

By: News On 6

Call it a correction, a bear market or whatever. But the losses are brutal and mounting.

The once high-flying Nasdaq Composite Index, dominated by U.S. technology companies, dropped 286.27 points Wednesday, or 7.1 percent.

It was the index's second-worst point loss eve

r and its first close below 4,000 since Jan. 31, leaving it in a sinkhole from which it won't soon emerge, analysts said.

"There is fear and panic on the part of technology investors," said Alan Skrainka, chief market strategist for Edward Jones & Co. "They are all heading for exits at the same time."

But Wednesday's losses are just part of the story.

The Nasdaq has been on a monthlong losing streak, dropping 1,278 points, or 25 percent, since its March 10 record high of 5,048.62.

There have been only eight 20 percent drops in the Nasdaq since its inception in 1971.

"And you know, I don't think it's over yet," said Mr. Skrainka.

Technology stocks also helped drag down the Dow Jones industrial average, which was off 161.95 points, or 1.43 percent, to close at 11,125.13.

In stride

Several North Texas investors contacted late Wednesday were taking the losses in stride.

Angela Frazier, 32, of North Dallas said she owns shares in 30 technology companies, which returned her 200 percent last year. And while other investors are running for cover, she doesn't plan to sell any of her stocks.

"This is to be expected," she said. "If you invest in technology you get big returns, but there are bigger risks."

Lawrence Patterson, 57, an insurance agent in Longview, said his portfolio of 38 technology stocks is down an average of 15 percent this year, and two of those stocks are down 60 percent and 30 percent, respectively.

"But I have said all along that to make it in this technology market you have to be in it for the long run," he added, "not just when there's some momentum."

Dow progress

The Dow Jones industrial average has been standing firm in the face of Nasdaq selling and has actually posted some impressive gains.

Despite the drop in the Dow on Wednesday, investors are still embracing the index's so-called Old Economy stocks, analysts said. Virtually all of the Dow's losses on Wednesday could be laid on the doorstep of just three technology companies: Intel Corp., Hewlett Packard and Microsoft Corp., all of which were down significantly.

Several Dow stocks posted stout gains, including American Express Co., which was up $5.56 a share to $150.75, and Procter & Gamble Co., which rose $2.88 a share to $69.31. Some investors are finding refuge in these old war horses of the Dow, which are considered more reasonably priced than their technology counterparts.

"There is a flight to quality where people are returning to the traditional value investing," said Mr. Skrainka.

Old rules

Or put another way - it may be a new high-tech economy, but the old rules of investing still apply.

Market strategists have been warning for months that the price-to-earnings ratio of the Nasdaq was outlandish, at more than 200. The ratio is calculated by dividing a company's stock price by its earnings per share; the higher the number, the riskier the stock. The price-to-earnings of the Dow is a much more respectable 20.

The spark for Wednesday's sell-off came from a Goldman Sachs & Co. analyst who cut his revenue forecast for Microsoft Corp. He cited slower personal computer sales as the reason.

Microsoft shares fell $4.50 to close at $79.38 and are down 32 percent this year. The losses have moved the software giant from the largest U.S. company to fourth, behind General Electric Co., Cisco Systems Inc. and Intel Corp.
Microsoft may have been the spark, but "the tinder was already dry, and that's why the forest went up in flames," said Brian Sayers, manager of the Dallas office of CIBC Oppenheimer Corp.

He pointed out that the Nasdaq had already soared 80 percent since October, well ahead of any reasonable earnings projections.

"To take back even half of that gain is kind of a normal corrective process," said Mr. Sayers.

Down from the start

The Nasdaq fell almost from the opening bell, then staged three anemic rallies before lunch before falling off the edge in afternoon trading. The Dow was up for most of the day before giving it up in the last hour of trading.

Still, analysts are encouraged that most of the Dow stocks rose. This indicates that investors are not abandoning the stock market entirely. Rather, they are looking for better-valued stocks to buy.

And that's good, said Mr. Sayers. He believes that a lot of the speculators, and investors who just buy whatever is hot, are being shaken out of the market.

"Truthfully, I am glad to see that," he said. "Those swinging for the easy money and thinking they can do this on their PC at home are seeing things blow up in front of them."

By the numbers

Advancing issues outnumbered decliners by a 10-to-9 ratio on the NYSE. On the Nasdaq, decliners led advancers by a 10-to-3 ratio.

NYSE composite volume totaled 1.42 billion shares, compared with 1.19 billion in the previous session.

The Standard & Poor's 500 index dropped 33.42 to 1,467.17 and the Russell 2000 index of smaller companies fell 16.69 to 493.44.

Staff writer Enrique Rangel contributed to this report.