Stock market suffers worst day since 9/11

MICHAEL L. DIAMOND
Asbury Park Press
Feb. 28, 2007

After the stock market's worst performance in more than five years, market watchers at the Shore on Tuesday said the decline was a much-needed correction in what had been an overheated market.

Experts said they had been awaiting a downturn, but they were caught slightly off-guard by its magnitude. The Dow Jones industrial average fell 416.02, or 3.3 percent, the seventh-worst loss when measured by points.

"It's very significant," said Robert Giunco Jr., vice president of the investment firm George McKelvey Co. in Sea Girt. "But it was so overdue. It's been 1,000 trading days since the Dow has seen a 10 percent correction. It's almost like an earthquake" releasing pent-up energy, he said.

Wall Street suffered through its worst trading day since the Sept. 11 terrorist attacks — at one point the market was down 546 points — bringing at least a temporary halt to what has been a bull market for the past four years.

The Standard & Poor's 500 fell 50.33, or nearly 3.5 percent. And the Nasdaq fell 96.66, or 3.86 percent. In addition to the major indexes, New Jersey stocks fared only slightly better. The Asbury Park Press/Bloomberg 75 index was at 157.63 Tuesday at 5 p.m., down 4.55 points, or about 3 percent.

The index is made up of 75 companies either based at the Shore or with significant operations in New Jersey. At the end of the day, 72 companies declined and three advanced.

Experts attributed the broad sell-off to a litany of factors:

The Chinese stock market fell 9 percent.

Former Federal Reserve Board Chairman Alan Greenspan said in a speech that the U.S. economy could be headed for a recession.

The federal government reported that orders for durable goods fell by 7.8 percent in January, the biggest drop in three months.

A blip or a trend?

Whether the decline was a one-day event or one that will last much longer was the subject of debate. Experts said there were signs the economy was nearing the end of an expansion cycle. But they said the Fed could take steps to jump-start the economy by lowering interest rates.

"I personally feel today is ultimately going to reflect a buying opportunity," said Kenneth Roberts, a principal with Harbor Lights Financial Group Inc. in Wall. "I still have a lot of confidence in the economy. This is a way for the market to blow off steam. I am still cautiously optimistic about the future for 2007."

At least one individual investor also viewed the downturn as a chance to buy stocks at a cheaper price. But the market's performance brought back memories of other significant declines as recently as 2000, when technology stocks collapsed and crippled retirement accounts.

"I'm pretty steady Eddie," said Bob Sickles of Rumson, owner of Sickles Market in Little Silver. "I have my simple IRA plan we have at work, and we can adjust whatever funds we have. . . . If (the market) keeps going downward, it's definitely a buying opportunity."

One money manager at the Shore said Tuesday's stock market performance is indicative of a period of slowing growth.

Gary Stroik, vice president and portfolio manager of WBI Investments in Little Silver, said the market is in the midst of a 17-year cycle during which stock appreciation will be lower than investors are accustomed to. He expects that cycle to last another 10 years.

Stroik's answer: Investors should buy companies that pay dividends to ensure they will get a return regardless of the stock's performance.

"Whenever you invest in stocks, you are taking a leap of faith," Stroik said. "But with dividends you get a parachute."

Looking on bright side

Other money managers said the stock market should be able to overcome Tuesday's correction. Signs of a slowing economy, for example, could prompt the Fed to lower interest rates and avoid a recession altogether, said Henry Mercer, president of Mercer Capital Advisors in Red Bank.

"If I was a long-term investor I would have my shopping list out right now," Mercer said. "Many of the largest U.S. business franchises are trading at very reasonable valuations. That's why I'd be buying."