Nasdaq gets mauled by bears as Wall Street weighs recession risk

Published December 3rd, 2000 - 02:00 GMT

Technology stocks took it on the chin this week with a brutal selloff that ended the worst November for the "new economy" index since 1987. 

 

The tech-heavy Nasdaq plunged 8.92 percent for the week to close Friday at 2,645,29, sliding nearly 50 percent from its peak in March. But the broader market saw more modest losses.  

The Dow Jones industrial average slipped 0.92 percent in the week to close at 10,373.54 and the Standard and Poor's 500 shed 0.54 percent to 1,315.18. 

 

The financial markets this week began mulling the prospect of recession or a "bumpy" landing for the US economy as growth slows, instead of the "soft landing" scenario seen up to now. 

 

Some analysts say the younger tech firms will be less able to handle a downturn than the more established companies. 

 

"We believe the current weakness in the stock market is a logical reflection of a transition to a slower pace of economic and earnings growth," said Rao Chalasani, chief investment strategist at First Union. 

 

"Whereas the last several years saw robust rates of growth in real GDP in the four to six percent range and earnings of around 20 percent, expectations are now being scaled back as business and consumer spending ramp down to more sustainable levels," Chalasani.  

 

"We anticipate economic and earnings growth more like three to four percent and seven percent, respectively, in 2001." 

 

Steven Wieting, an economist at Salomon Smith Barney, also said the outlook for the US economy has to be less rosy than before. 

 

"Oil prices more than tripled from their 1999 lows, by some measures creating the worst energy price shock on the US economy in 30 years," he said. 

"The routine of electing a new president ended in a bizarre stalemate. We have reduced growth estimates for the US economy in 2001 due to the persistent weakness in capital markets, the energy price shock, and strength of the dollar." 

 

Despite the bloodletting on Wall Street, some analysts remained optimistic, saying economic growth is coming down to more sustainable levels. 

 

Abby Joseph Cohen, chief investment strategist at Goldman Sachs, this week reiterated her positive forecast for stocks, and said they had fallen to "attractive" valuations. 

 

"We believe this is good news, not bad, because it increases the likely longevity of the economic expansion," Cohen said.— (AFP)  

 

© Agence France Presse 2000  

© 2000 Mena Report (www.menareport.com)

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