I'm a novice when it comes to the stock market. I know that the DOW was down by 139.61, and the Nasdaq up by 61.84, the S&P down by 14.03. Everyone is talking about the stock market.....and a lot of people are talking in very negative terms. Can someone explain why the DOW going down today was important news and why so many people are very negative about it?

-- Linda (lindasue1@earthlink.net), January 04, 2000

Answers

Interesting question Linda. I don't know why there are negative thoughts concerning the stock market. The investment community however has been carefully desensatized to interest rate increases. Greenspan did this by modulating discount rates using quarter point intervals rather than the usual half point increments. Now even the threat of a hike doesn't scare off investors...and it worked well during the last rate increase...so what's everyone so negative about? I agree. Besides the DJIA falling 140 points is a drop in the bucket these days...is it not?

Incidentally, remember it took multiples of decades to get the DJIA to 5349.51 [July 16 1996 ]; but it only took 3 1/2 years to more than double that number. Imagine, since 1996 we pumped more wealth into the stock market than we did in over 77 years. I guess we are a better breed of people ...or maybe we are working harder...or...well there is another answer possible as well...but no previews here...I wouldn't want to be in the same shoes Gary N or Michael H are in...so we'll just wait for the surprises.

-- Howard Klein (cso@monomerchem.com), January 04, 2000.

The move down should not be unexpected in January of any year. Expect some ups and downs until mid January then a gradual rise to April. The positives of few Y2k glitches most probably will mean that a relatively normal stock market cycle will run for at least the first six months of 2000.

-- Stephen R. Taylor (srt@interact.net.au), January 04, 2000.

The reality: anyone cashing in on the giant gains they have made over the last few years doesn't have to pay capital gains taxes until April 15, 2001.

Also, reports are that there is some institutional selling. The reason for that is that institutions report to their clients based on year-end totals (or near year-end), this would lock in reported gains while hedging against any downward movement in the market.

-- Bud Hamilton (budham@hotmail.com), January 04, 2000.

The NASDAQ was very bumpy up 100, down 60, up 60. S&P futures are now down 17 indicating a negative open.

-- Steve Davis (Columbia, MD) (Steve@davislogic.com), January 04, 2000.

Not all of the smart money is falling for this idea that Y2K is a hoax. The folks who sit in front of screens all day have some idea what is really happening re Y2K. The other reason is, of course, to take profits now that the year end has passed. But that would not normally cause such as sharp selloff like -150 on the Nasdaq and -250 on the Dow as is the case today. We expect gold to test $275 as well before recovering. We predicted all this in our newsletter which you can find at www.dingdingding.com

-- Ron Sellar, Market Technician (y2kbook@telusplanet.net), January 04, 2000.

Tuesday's info:

"Dow off sharply; Nasdaq posts record one-day loss (CNN.com)

Wall Street suffered its worst day in almost 16 months Tuesday, with technology companies bearing the brunt of the selling as investors focused on the possibility of higher interest rates.

According to preliminary figures, the Dow was down 359 points, or 3.13 percent, and the Nasdaq was off 230 points, or 5.6 percent. It was the biggest single-day point drop for the Nasdaq in its history and the worst decline for blue chips since the summer of 1998."

-- Jennifer Bunker (Salt Lake City, Utah) (jen@bunkergroup.com), January 04, 2000.

As many of you know, the Feds printed 80 billion dollars for bank runs. Well the 80 billion would not have done any good sitting at the federal reserve so they sent it out to the central banks. They had no desire to sit on that amount of cash and pay the feds interest on it. So they dumped it into the market over the 4th quarter. While many of us where shifting our money to anuities. That not only held up the 4th quarter, but now that the feds beleave Y2KOK, they want the money back out of circuclation. Well it looks as though the central banks are pulling it out of the market faster than people are willing to get back in. It should prove to be an interesting couple of weeks.

-- Ken Borchardt (Arals60798@aol.com), January 04, 2000.

American Express Perspective on Market Events; Financial Advisors UnitCautions Clients to Stay Focused on the Long Term

MINNEAPOLIS, Jan. 5 /PRNewswire/ -- Investment strategists at American Express are reminding clients to put yesterday's market activity, which saw the Dow drop 3.2 percent and the Nasdaq fall 5.5 percent, in perspective.

"We're coming off a period of moving straight up," said Joe Barsky, vice president, equity investments, American Express. "The Nasdaq has gained 50 percent since October and was up 25 percent in December alone. A correction of 5 percent in that index is really not extraordinary." And while this time of the year is usually volatile, Barsky expects that in the next few weeks investors will start piling back into the market some of what they've been holding in money markets, new qualified plan dollars and bonuses. "I expect things to settle down within a couple of weeks," he said.

So why the big drop yesterday? "This has been a great ride for many investors and now that we're into a new tax year they're taking profits," said Barsky. "My long term outlook is positive. I think we'll see strong earnings in 2000. There is a lot of cash in money markets that needs somewhere to go, and I think the market will broaden in 2000, with value stocks starting to do better."

As for Monday's drop in the bond market, Dan Laufenberg, chief U.S. economist at American Express, blamed uncertainty about the employment report due out at week's end. "1999's passing left most of the world's population feeling relieved of the threat of Y2K just in time to worry about the threat of potential interest rate hikes early this year by the Fed," he said.

"Tuesday's rally in bonds was a bit of a flight to quality," adds Fred Quirsfeld, senior vice president, fixed income investments, American Express. "The equity market was weak, the markets overseas were weak -- the yield on long-term Treasuries looked good." Like Barsky, Quirsfeld reminds investors to keep recent events in perspective. "Early in the year, this kind of activity is not unusual," he said.

In the face of all this activity, American Express is advising individual investors to remember a few points:

-- Market fluctuations are part of investing. Try to not get caught up in daily or weekly market swings, but stay focused on a long-term strategy that can help you meet your goals.

-- It's a good idea to invest, stay invested and keep investing. Over time, a program of investing regularly can help clients weather market volatility.

-- Make sure your allocations are still appropriate and that your portfolios are properly diversified.

-- Watch for buying opportunities -- sort of an after-the-holidays sale! Dips like we've seen on Monday and Tuesday may be a good chance to pick up a stock that's been too expensive.

American Express Financial Advisors is one of the nation's leading financial planning companies. It is part of the American Express Financial Corporation family of companies, which currently owns and/or manages more than $232 billion in assets. Through a network of more than 9,300 personal financial advisors, the company provides ongoing, long-term financial planning and high quality financial products to more than two million clients throughout the United States. For more information on American Express Financial Advisors visit the company's web site at http://www.americanexpress.com/advisors or call 800-386-2042.

SOURCE American Express Financial Advisors

CO: American Express Financial Advisors

ST: Minnesota

IN: FIN

SU: ECO

01/05/2000 12:11 EST http://www.prnewswire.com

-- Cyndi Crowder (cyncrowder@aol.com), January 05, 2000.