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Breaking News

Wall Street Spins Into Freefall

Aired April 4, 2000 - 1:24 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: Our big story of the hour is the freefall on Wall Street.

DONNA KELLEY, CNN ANCHOR: Some of the numbers coming back just a little bit, but still deep in bad territory, the Dow down 347, Nasdaq down about 540 points.

We want to join our sister network, CNNfn, right now for their coverage.

(JOINED IN PROGRESS)

... in terms of the fundamentals in a lot of these cases.

PATRICIA SABGA, CNN ANCHOR: OK, I would like to welcome our CNN viewers now joining us. We are on the set right now with Frank Retz (ph). He is a market analyst at Shields & Company. We also have our very own technology correspondent, Bruce Francis, here joining us today. And we also have Bill Tucker who's sitting next to me right now.

BILL TUCKER, CNN ANCHOR: And I sat down and Frank's talking about panic's a very personal thing, and I -- there's an appropriate price to pick this up, as a matter of fact. And we've got some major selling here. The volume is heavy on the downside, Frank. A lot of people unnerved because you can bet they're going to their Fidelity Web sites, they're looking at their 401(k) wealth just rapidly disappear in front of their eyes. I mean, what do you do? I mean, where do you find the sanity in this kind of market?

FRANK RETZ, SHIELDS & COMPANY: Well, you know, there's an old saying: You sell down to the sleeping point, first of all, because you don't want to get caught up in a market where you're panicking. It's nice to have the market in a panicky kind of mode because you get the selling out of the way. But it's always good advice for all of us never to get too extended. Sell down to the sleeping point, as they say, or just not be too far, you know, over the edge here in terms of your ownership -- what you own in the market.

But, you know, I think we are going into a phase now where we're going to get some margin calls. So that's whether I don't want to sell but I have to sell because it's forced liquidation, I'm, you know -- I have a margin call. And, but, then again, that gets the selling out of the way. So that's kind of forced panic. But once you get the selling out of the way, that's how you put in a reasonably good low.

SABGA: OK, Bruce, for our viewers who are just joining us from CNN, can you give us a bit of a perspective now on how broad-based the technology sell-off is today and the impact of Microsoft and what it's having on the Nasdaq today.

BRUCE FRANCIS, CNN CORRESPONDENT: Sure, Patty. And let's start with Microsoft. I think you can put Microsoft in the file of one other trip wire out here. It's certainly added to the negative tone -- a negative tone, though, that was already very, very obviously in the tech market. Last week was a brutal week. We thought, well, gee, we just can't take another week like last week, and here we're having another day today like all of last week.

We do see some of the biggest names that have accounted for the big run-up in the Nasdaq, and then that's doubled over the past year. We see some of those big names being sold and sold hard. That's -- that could be evidence, some say, of -- everyone from managers to individual stockholders saying, I've got to sell these to cover my losses somewhere else. This is not a change in the perception of how these companies are actually going to perform when it comes to earnings, but it is a feeling of, gees, we just -- we've got to get out of these here. We've got to cover for tax purposes. We've got to cover margin calls. That is the kind of thing that's consistent with certain types of panic selling.

SABGA: Now, let's do a more sort of thorough breakdown of margin calls because this is a term that's coming up a lot in this conversation. So can you give a brief description of what a margin call is and why that is impacting the Nasdaq at this moment?

FRANCIS: If you -- essentially, if you borrow money to buy a stock, you bought it on margin. And after a while when those stocks get down, your broker gets nervous and says, OK, Patty Sabga, you borrowed that money. I'm not sure you can pay it back. You've got to pay it back. The books don't look got to me. Then you as an investor have to go out and raise that cash to sell it. And sometimes you raise the cash by selling other securities.

SABGA: OK, well let's take a look at where the Nasdaq is standing right now. We have the Nasdaq composite index off 488 points at 3735, though that is off the low. The low of the session, it was down as much as 3649. We also have weakness in the Dow Jones Industrial Average, off 252 at 10969. But, again, that is off the Dow's lows for the session. It was -- the Dow was down even -- down as much as 10717.

And we will be right back. Our market coverage continues.

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