Marketplace 4/4/2000

It's Tuesday, the 4th of April.

It was a case of the final score not telling the whole story of the game. The Dow today closed down 56 points or 0.5 percent. The NASDAQ Composite Index closed down 77 points or 1.75 percent. Big deal, you might say. But the volatility today was a big deal, with the largest point swings ever recorded. Shortly after lunch eastern time, the NASDAQ Composite Index had fallen 574 points or 13.6 percent. That's like the Dow falling 1,500 points at today's prices. The Dow also had its grim moments. It was down 500 points for a time today. Some market players took heart in the partial bounce back from the abyss. Others aren't so sure that investors will make much money trying to guess which day the tech stocks will be down and which day the more venerable, value stocks will be up. This volatility against a backdrop of rising interest rates does not bode well for stocks, argues independent money manager and economist Gary Shilling.

Shilling: "I think the Fed has resolved, despite the convoluted statements of Chairman Alan Greenspan, to basically bring stocks to heel because they go on to dispense with enough with that appreciation to curb consumer enthusiasm and spending. So, it's pretty tough to fight the Fed. If you were to pick in a race between the tortoise Fed raising interest rates very gradually and the fleet-footed Internet hare, I'd bet on the tortoise any day."

These enormous swings in NASDAQ share prices today spawned an avalanche of buying and selling. Two point eight billion shares changed hands today on the NASDAQ, smashing the previous record of 2.2 billion.

Marketplace's Jeff Tyler talked to investors on Wall Street today and found some calm amid the frenzy.

Tyler: "With so many Americans invested in technology stocks, you might expect a free fall on the NASDAQ would freak people out. But just the contrary, instead of a panic, I found that many individual investors saw the sell-off as a kind of deep discount sale. Investor Jack Roser put it this way."

Roser: "My experience is generally when it gets emotional, you're better off doing the opposite that what your gut tells you and probably buy a little. Not too much of it at once, but just to sort of buy a little against the trend."

Tyler: "At the office of discount broker Charles Schwab, branch manager Larry Hill says despite the volatility, customers remained calm, though inquisitive."

Hill: "Some people have inquired if this is a good time to buy. But we have not seen people panicking."

Tyler: "For the most part, the folks lining up to trade on the Schwab computers were bargain hunting."

Investor: "October '98, if you remember, it went all the way down. I was watching the screen today and the NASDAQ was down almost 600 points at one point, and it's starting to come back."

Tyler: "And come back it did. That's partly because investors have been conditioned over the past few years not to worry about steep declines, and treating them instead as chances to buy stock cheap. But when an index like the NASDAQ tanks 13 percent and few people are worried, some market watchers say it might be time for the rest of us to be just a little bit wary. In New York, I'm Jeff Tyler for Marketplace."

There's more analysis on the swinging sounds of the stock market ahead on Marketplace.

Microsoft shares fell another 2.5 percent today as investors digested the meaning of the company being branded a law-breaking monopoly yesterday. U.S. District Court Judge Thomas Penfield Jackson now turns his attention to ways that Microsoft will be made to remedy the problem, even as the software company plans its appeal. As Marketplace's John Dimsdale reports from Washington, the judge will be getting lots of advice.

Dimsdale: "Microsoft's harshest critics are hoping the court will give it the Ma Bell treatment. Michael Morris, who's general counsel at Sun Microsystems, envisions divvying up the company five ways, including creating three competing sellers of Windows."

Morris: "So that you have three entities selling essentially the same type of operating system technology competing for customers. That ought to provide consumers with much lower prices and, over time as they compete with each other, higher quality and more innovative products."

Dimsdale: "But University of Texas economist Stan Liebowitz thinks breaking up the company would do just the opposite. He has studied Microsoft's effect on the software industry, concluding it is responsible for better products at cheaper prices. He says separate Windows manufacturers would soon be selling incompatible operating systems, forcing software makers to design versions for all three."

Liebowitz: "We actually did a survey of software developers to see how much they thought their costs might go up if they had to create three versions of their product, one to run on each version of Windows. They came up with a number which was a 21 percent increase in their costs."

Dimsdale: "Liebowitz concludes consumers would pay an additional ten billion dollars for software every year. He and others argue a better remedy would be to require Microsoft to give software developers better access to the Windows structure, to make sure that new programs work more smoothly with Windows. In Washington, I'm John Dimsdale for Marketplace."

It was a very strong day for the bond market, boosted in part by some investors looking to get out of stocks on a day that the Dow and the NASDAQ took on some of the attributes of a demonic theme park ride. Also, today's index of Leading Economic Indicators for February fell 0.3 percent, the first drop in five months. Today, the yield on the 30-year treasury fell to 5.77 percent.

And that's the top of our news for Tuesday.



Battle for German Consumers
Germany's biggest retailer, faced with tough competition from European and American rivals, has changed its pricing policy. Thomas Marzhal has this report.

After the Verdict
Historian John Steel Gordon takes a look at the historical relevance or irrelevance of the decision in the Microsoft anti-trust trial.

Middle of the Week on Wall Street
The Nasdaq and the Dow Jones experience record volatility, and we checked in with Dallas stock broker David Johnson in the middle of the week to get a perspective on the roller-coastering markets.

Feminists and Corporate Advancement
The Feminist Expo 2000 took place in Baltimore this weekend. Bea Black reports on some of the employers who are luring women into new professions.

Cronkite and Gates
Comedian Tim Bedore has his own version of an interview between Microsoft's Bill Gates and journalist Walter Cronkite the day after the Microsoft anti-trust ruling.

Look-Ahead
Coming up on 4/5/00: The Alvin Ailey Dance Company is flourishing -- And that's news. Some eight years after the death of Alvin Ailey, his dance company, under the artistic leadership of Judith Jamison is an overwhelming success.