Closing Market Report

Star-Bulletin news services

Saturday, November 3, 2001

Stocks a hard sell
to snakebit investors

Americans are holding onto their
money as bad economic data
and terrorist threats persist

By Lisa Singhania
Associated Press

NEW YORK >> Amid the gyrations on Wall Street the past few weeks, one critical constituency has been noticeably absent: individual investors.

Already a hard sell in the weak economy, stocks have become even less attractive to Americans who hear news daily about terrorism alerts, layoffs and bleak business forecasts.

Instead of relying on earnings or profit forecasts, investors are being guided by fear.

"My gut feeling is to wait until the end of the year and maybe think about buying something in January," said Barbara Eng, a New York-area public relations consultant, who hasn't made any major changes in her portfolio this fall, and believes that other investors share her reluctance.

"People aren't going to be willing to part with their money because they don't know if they're going to have jobs," she said. "People are sitting tight and re-evaluating their lives right now and aren't going to be making any unnecessary expenditures."

Financial advisers and analysts across the country are hearing similar statements from their clients. They say the unrelenting wave of bad news has many investors thinking more than twice before making big stock commitments.

"It's the hedge funds and mutual funds with a shorter-term outlook that are taking advantage of the market weakness to step in and buy stocks they think are oversold," said Bill Barker, investment consultant at RBC Dain Rauscher. "Individual investor confidence is coming back slowly, but I don't think individual investors have really stepped up to the plate yet."

This past week alone, the market absorbed the worst consumer sentiment readings in 7 - 1/2 years and the nation's highest unemployment figures in more than two decades. Although stocks sold off early in the week, by yesterday bargain hunters helped stabilize the market. A decision by the Treasury Department on Wednesday to discontinue issuing 30-year bonds also helped.

Much of the selling was attributed to mutual funds, whose fiscal year ended Oct. 31. Still, there were doubts the market would succeed with any sustainable advance, at least in the short term.

"One of the drivers of people's behavior are their expectations about the future and about their own circumstances," said Will Braman, chief investment officer of John Hancock Funds. "Because of the recent experiences in this country and the economic data, the expectations about the current environment and future are pretty dim."

That's not to say individual buyers aren't participating in the market. Rather, their moves have become more restrained with money going into more conservative bonds or just staying in money market accounts.

"My clients ... don't have 20 percent returns on their investments to be seduced by anymore," said Nancy E. Frank, a certified financial planner in New York. "I also think people are much more concerned with their employment status than investing. If you don't have a job, you're really not concerned about saving for retirement."

Other investors say they're short of cash.

"I haven't sold any of my stocks because their prices are quite depressed right now from the levels I bought them at and I'm waiting for a rebound," said John Griffin of Plymouth, Mich., who lost his job as a financial analyst last spring. "I also can't buy because of my job situation. But there are definitely opportunities out there."

Indeed, many stock pickers say there are good buys out there -- with the caveat that investors be prepared to buy and hold, without expectation of any immediate riches. But they acknowledge that, in the absence of concrete indications that the economy or business are improving, investing will likely be a trying experience for the foreseeable future.

"Investors should have an investment and savings plan which they stick with, whether it's $100 a month or whatever number can be afforded out of the family budget," Braman, the John Hancock investment officer said.

For the week, the Dow Jones industrial average fell 221.63, or 2.3 percent, despite advancing 59.64 to 9,323.54 yesterday.

The Nasdaq composite index dropped 23.23, or 1.3 percent, for the week after declining 0.57 to 1,745.73 yesterday. The Standard & Poor's 500 ended the week down 17.41, or 1.6 percent, after rising 3.10 to 1,087.20 yesterday.

The Russell 2000 index, the barometer of smaller company stocks, lost 5.58, or 1.3 percent, for the week, finishing yesterday down 1.81 at 433.07.

The Wilshire Associates Equity Index -- which represents the combined market value of all New York Stock Exchange, American Stock Exchange and Nasdaq issues -- ended the week at $10.016 trillion, down $168.720 billion from last week. A year ago, the index was $13.382 trillion.

Meanwhile, the 30-year Treasury continued its volatile trading, falling 2 -7/16 points, or $24.38 per $1,000 in face value yesterday. Its yield, which moves in the opposite direction, rose to 4.95 percent from 4.80 percent Thursday. Over the previous two days, the long bond had risen more than 6 points following the Treasury's announcement to stop offering new issues.

The price of the 10-year Treasury note was down 1 point, or $10 per $1,000 in face value yesterday. Its yield rose to 4.35 percent compared with 4.23 percent.

The 2-year note was unchanged and yielded 2.48 percent.

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