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World Today

Today Marks Single Most Volatile Day in Stock Market History

Aired April 4, 2000 - 8:00 p.m. ET

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

WOLF BLITZER, CNN ANCHOR: Today marked perhaps the single most volatile day in stock market history. At one point, the Nasdaq and Dow Jones industrial average were each down 500 points. The Nasdaq was in negative territory almost from the opening bell and stayed in steady decline until bargain hunters stepped. After dropping 574 points at its lowest mark, the Nasdaq rallied to close with a loss of almost 75 points, at 4148.

The Dow started the day in positive territory before quickly losing ground. Again, bargain hunters helped it rebound to close with a modest loss of 56 points, at 11165.

For more now on today's ups and downs, we're joined by MONEYLINE's Stuart Varney.

Staurt, first of all, why did the markets sell off as they did? And what caused this big buyback?

VARNEY: I think would that, Wolf, that there are three factors to take into consideration here. Number one, a continuation of last week's trend, where money came very quickly out of those highly valued tech stocks. Number two, the Microsoft decision. It's always unsettling when a very successful tech company is threatened with a breakup, and number three, what we call margin calls. Now if you buy stock on borrowed money and the stock goes down, your broker will call you and force you to sell those shares to make up the money you borrowed. Now that is a for sale and it tends to accentuate the downside move of the stock market -- three factors, I think, played a big role today.

BLITZER: All right, Stuart, predictions in this market are very, very difficult given the volatility, but the experts that you're talking to, what can we expect tomorrow, a lot of people want to know, and the rest of this week?

VARNEY: If you're asking specifically about tomorrow, I suspect that there is a consensus opinion that says we might get a rally, especially in tech stocks, why? Because over the past five years, if you bought tech stock whenever they were sold off heavily and held them for a short time, you'd get a very nice bounce and you'd make some money. They could be that in evidence tomorrow. However, if you talk to more analytical people, not traders, they will tell you that the valuations are still sky high and still have to come down some more. So it's a split camp. Tomorrow, many people think we'll get a bounce. For the longer term, there are equal numbers of people who say it's still overvalued.

BLITZER: Is it fair to say at this point, given what's happened over the past two days, the aftermath of the Microsoft decision, is it fair to say there's a crisis of confidence in the markets?

VARNEY: No. I think that's a bit of a strong word. A crisis of confidence in the markets goes a bit far. I would say that there is some caution in the marketplace about the new economy. The question is, can the new economy provide the kind of profitability that we've been promised for so long? There are some who suspect that maybe the profits will be a long time coming, hence the selling, especially in Internet-related stocks.

BLITZER: Stuart Varney. And Stuart will be back later in the program with more on this wild day on the stock market. Thanks.

It was just a month ago when the Nasdaq was at its all-time high of 5048. The index is now trading at nearly 18 percent below that level, at 4148. Despite the losses, the Nasdaq is still up nearly 2 percent for the year. One other note, today the Nasdaq recorded its busiest session ever, trading nearly 2.9 billion shares.

Today's wild market fluctuations are enough to make anyone feel uneasy, especially small investors. But the experts say we should stay focused on the big picture.

CNN's Gary Tuchman has that story.

(BEGIN VIDEOTAPE)

GARY TUCHMAN, CNN CORRESPONDENT (voice-over): Mike and Betty Shirley of Eureka, California have a good chunk of their assets in the stock market. So did their stomachs turn when they heard about the craziness on Wall Street?

MIKE SHIRLEY, INVESTOR: Changes in the market doesn't bother me. You buy the stock for the company, not for just temporary value.

TUCHMAN: Walt Haraszskwicz (ph) of North Carolina is also a long-term investor, but a lot more nervous.

WALT HARASZSKWICZ, INVESTOR: There's nothing safe, nothing I can guarantee my children for their future.

TUCHMAN: Indeed, there are no guarantees when it comes to the stock market. But according to the experts, the Shirleys have a much more appropriate outlook.

VINCE FARRELL, SPEARS BENZAK SALOMON & FARRELL: I think a day like today really is of interest almost academically only, because if you're really looking longer term, you'll be concerned, fascinated, horrified, interested, or whatever adjective you want to apply, but it should not deter you from the fact that stocks have been the superior investment choice over the long haul, and I suspect they'll continue to do so.

TUCHMAN: Also, say analysts, keep in mind that good opportunities often come with volatility.

DAVID RATAJCZAK, DIRECTOR, ECONOMIC FORECASTING, GEORGIA STATE UNIV.: Long-term investors shouldn't have any concerns about a day like today, except that perhaps that they lost the opportunity to buy something very cheap.

TUCHMAN: Mike Shirley says he is looking for bargains. In the meantime, his attitude about his losses is:

SHIRLEY: Don't panic. It'll still be there.

TUCHMAN (on camera): A rollercoaster day on Wall Street is unnerving. But just a like a real rollercoaster, long term investors are usually better off just hanging on.

Gary Tuchman, CNN, Atlanta.

(END VIDEOTAPE)

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