As Stock Prices Fall, So Do Investors' Hopes

NEW YORK, July 13 -- In the late 1990s, newsstand operator Louis Taub, like many Americans, learned to treat the stock tables like the baseball standings, eagerly flipping through the business section to see just how high his stocks could soar.

Now, Taub, like many others, can barely stand to look.

"My wife still checks the numbers," an exasperated Taub said Friday as he prepared to close up his newsstand on Manhattan's Upper West Side, after the stock market had finished its worst week since Sept. 11. "But I can't do it. Just when we were getting close to retirement and needed the money, the market started going down."

Chances are Taub won't like what he sees if he peeks at the numbers any time soon. The Dow Jones industrial average plunged nearly 700 points in what amounted to a rolling five-day mini-crash. Both the Nasdaq composite index and the Standard & Poor's 500-stock index dipped into official bear territory, meaning they are more than 20 percent below their recent highs.

But this week's brutal losses simply add insult to the stunning injury of the past two years. Since its peak in 2000, the technology-laden Nasdaq has lost three-fourths of its value, the worst decline for a major stock average since the Depression. The S&P, a benchmark for the overall market, has fallen 40 percent over the same period.

As they do every workday, money managers and market strategists rattled off a half dozen reasons for this week's swoon: mutual funds selling shares to raise money to pay anxious investors cashing out; drug stocks taking a hit after the Senate passed a bill favorable to generics; Ford Motor Co. and General Motors Corp. shares plunging over fears generated by their heavy pension liabilities, which were in turn made heavier by the down market; European money fleeing U.S. stocks for safer havens; a drop in the consumer confidence index.

But more than any one factor, many financial observers said the seemingly endless litany of corporate scandal -- Enron, WorldCom, Tyco, ImClone, Qwest, Bristol Myers-Squibb, Merck and on and on -- coupled with the shakiness of the underlying economy have finally pushed investors close, if not beyond, that mystical tipping point known as "capitulation." That's when they finally cut their losses and move their money out of stocks.

"There were bits and pieces of news this week -- the president's speech, a few other things, but not enough to explain what's happening," said James Paulsen, chief investment officer at Minneapolis-based Wells Capital Management, which manages $75 billion. "This was panic. We've gone from excessive optimism at the beginning of the year, to serious pessimism, and now to downright fear."