Market Reopens, LR Index Hits New Low
Shortly after U.S. markets reopened this morning for the first time since Tuesday's terrorist attacks on New York and Washington, D.C., the Light Reading Index hit an all-time low of 160.96.
In late-morning trading, markets attempted a rebound, rising slightly from the morning's lows. At mid-day, the Dow Jones Industrial Average was down 514.45 (5.36%) to 9091.06 and the Nasdaq was off 84.43 (4.98%) at 1610.94. The Light Reading Index was trading at 164.12, down 11.02 (6.29%). Prior to the market's opening, the Federal Reserve and several multinational corporations took steps to add liquidity to the market for fear of even slower spending across all sectors. The Fed cut interest rates a half point before the market opened, saying that that even before last week's terrorist attacks, employment, production, and business spending remained weak, and last week's events "have the potential to damp spending further."
"This is no better or worse than we expected," says George Hunt, an analyst at Wachovia Securities. "But investors who are in the market for the long term may come back and look at this as an attractive time to buy." Hunt guesses that the markets will close even or slightly up at the end of the week.
Hunt says networking and telecom stocks likely won't be as susceptible to consumer confidence as other sectors, since they've already lost a considerable amount of their value thanks to service provider capital spending cuts.
In attempts to stem investor panic, several large companies - many in the networking and financial sectors - announced they were buying back some of their own shares as a way to add liquidity to the markets and reassure investors of their prospects. Companies announcing stock buybacks included Cisco Systems Inc. (Nasdaq: CSCO), FleetBoston Financial (NYSE: FBF), First Data Corp. (NYSE: FDC), chip maker Intel Corp. (Nasdaq: INTC), enterprise software maker Siebel Systems (Nasdaq: SEBL), software maker BEA Systems (Nasdaq: BEAS), coffee retailer Starbucks Corp. (Nasdaq: SBUX), and contract manufacturer Sanmina Corp. (Nasdaq: SANM)(see Cisco Sets Stock Buyback).
With hardly any exceptions, the stocks comprising the Light Reading Index were all down in Monday morning trading. The largest losers of the morning included communications semiconductor companies Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC) and Vitesse Semiconductor Corp. (Nasdaq: VTSS), which were down 10% and 14%, respectively. Equipment maker MRV Communications Inc. (Nasdaq: MRVC), whose CFO died in one of last week's attacks, was down $0.38 (11.76%) to $2.85.
With so much world news to digest, some are straining to see a silver lining in today's sell-off. "It is during declines that one becomes constructive," wrote Ralph Acampora, Prudential Financial's managing director of global equity research, in a stock market commentary. "It is those groups of stocks that hold up the best during a sell off, that don't make new lows, don't break support levels, don't break up-trends, that outperform the market, which give us an idea as to who the new leaders could be."
- Phil Harvey, Senior Editor, Light Reading