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Stocks Roller-Coaster as Gore Challenges Vote

Markets: Dow falls 150 points at midday when his camp makes announcement, but ends just 0.7% down after investors jump back in.

November 10, 2000|THOMAS S. MULLIGAN and JOSH FRIEDMAN | TIMES STAFF WRITERS

Wall Street may welcome legislative gridlock, but gridlock in the presidential-election outcome is another story.

The threat of a prolonged legal challenge to the election results triggered a midday plunge in the stock market Thursday, though share prices recovered most of their losses by the close.

Still, investors' heightened nervousness over the election may remove more potential buyers from the market in the near term, analysts said--a troubling prospect, especially for the beaten-down Nasdaq market.

Major stock indexes were trending lower Thursday, then went into a free fall at midday after Vice President Al Gore's campaign leaders said they would support legal challenges to the Florida presidential vote.

The Dow Jones industrial average plummeted 150 points within a few minutes of the Gore team's announcement, pulling the index down 289 points, or 2.6%, to 10,618 at its low point in the session.

But buyers quickly jumped back in, lifting the Dow in late afternoon trading. It finished the day at 10,834.25, down 72.81 points, or 0.7%.

The tech-dominated Nasdaq composite index fell as much as 144 points by midday, then rallied to finish off 31.35 points, or 1%, at 3,200.35--its lowest close in nine sessions.

Among the groups hit hard in the afternoon plunge were drug, energy and tobacco stocks. Investors had piled into those groups Wednesday betting on a victory for Gov. George W. Bush, who is seen as far friendlier to those industries than Gore.

Fearful that a Bush victory now isn't assured, or is at least delayed indefinitely, some investors dumped drug giant Eli Lilly, which fell as low as $87.13 Thursday before rebounding to end down 75 cents at $89.69. Merck sank to $88, then rose to end at $90.44, down 38 cents, after surging $3.94 on Wednesday.

Tobacco titan Philip Morris fell as low as $34.56, then ended at $35.63, down $1.06.

Energy stocks also ended mostly lower, despite a jump in crude-oil futures in New York to $33.92 a barrel, up 68 cents, on renewed supply concerns.

Overall, losers topped winners by 17 to 11 on the New York Stock Exchange and by 2 to 1 on Nasdaq, on moderate volume.

As stocks slid, some investors shifted to Treasury securities, pulling yields down across the board. The 5-year T-note yield fell to 5.78% from 5.81% on Wednesday.

Beneath the surface, though, the market continues to be roiled by the same factors that have depressed it for months, such as worries of tech-stock valuations, said Scott Bleier, investment strategist at Prime Charter Ltd., a New York investment bank.

"A lot of the 'hot' Bush money that had come into the market came out [on Thursday]," Bleier said. "Aside from that, this is a market that is doing exactly what it did before the election."

Indeed, many technology stocks were among the biggest casualties Thursday, adding to Wednesday's losses, when the Nasdaq index slumped 5.4%.

Internet issues were particularly weak Thursday, and software and telecom shares also fared poorly.

Losers included Yahoo, down $6.19 to $58.81; Inktomi, down $6.50 to $56.50; DoubleClick, down $3.25 to $15.50; and Veritas Software, down $5.25 to $139.25.

But some investors snapped up such tech giants as Microsoft, which gained $1.44 to $70.88; Cisco Systems, which rose $1.13 to $53.25; and Oracle, which rose $2.38 to $27.19.

Also, Broadcom gained $10.63 to $162.44 after the chip maker said it was "very comfortable" with analysts' average earnings estimate for the current quarter.

Walt Disney led the entertainment sector lower on concerns about ad-revenue growth at its ABC-TV unit. Disney shares tumbled $5.75 to $31.13, helping to drag the Dow index lower.

Still, some analysts were upbeat. "The market never likes uncertainty, but frankly, given all the confusion and static noise in the last two days, this market has reacted quite well," argued Dennis Ferro, investment chief at Evergreen Funds in Charlotte, N.C.

"Whoever is finally elected, we're going to get government by coalition, government by moderation. The strongest and most controversial programs of either party will be tempered. That's a positive long-term," Ferro said.

"This looks to me like a buying opportunity in the equity market, and when we look back in six or 12 months, it should look like a buying opportunity in the bond market also," he said.

Some analysts raised questions about whether foreign investors in U.S. stocks might be driven to sell their shares, amid fears of a U.S. constitutional crisis.

But Charles F. Henderson, portfolio manager at Voyageur Asset Management in Chicago, said foreign investors probably won't be a great influence on the market during the stalemate. For one thing, he said, the surge in trading by individual investors in the United States over the last few years has diminished the relative clout of foreign market players.

He also said foreign investors pay more attention to the Federal Reserve and its interest-rate decisions than to U.S. political turmoil. And the Fed, at its meeting next week, is expected to keep its key short-term interest rate unchanged amid a slowing economy.

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Market Roundup: C7, C8

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