When Willis Greco, assistant trader at Merrill Lynch & Company, saw the Telerate numbers on his Internet hot stocks down by at least 30 percent at midday Friday, the honeymoon of his love affair with tech growth was over. He sighed, signaling it was back to business as usual.
"Time to buy more Krispy Kreme Doughnuts Co.," Greco said.
Investors bailed out of technology stocks to shift their money into blue chips last week, sending the Nasdaq Stock market down sharply and boosting the Dow Jones Industrial Average.
Despite a late-day rally on Friday, the Nasdaq composite index fell for four straight sessions last week, posting its third-biggest point loss on record, as investors swapped high-flying technology leaders for trusted classics that have been neglected as of late such as: oil producers, retailers and consumer-products makers.
Cisco Systems, Sun Microsystems and JDS Uniphase fell, but stocks like Wal-Mart, Coca-Cola and Exxon-Mobil gained, lifting the Dow Jones industrial average, which is still down year-to-date.
Greco pinned the day's action on a periodic but usually fleeting phenomenon: money fleeing the most expensive stocks for out-of-favor bargains.
Friday Nasdaq fell 186.7 points, or 3.9 percent, to 4457.89, adding to a 131-point drop over the previous two sessions. The week's loss topped the previous No. 3 plunge of 188.13 points set March 20.
The Dow finished 10980.25. The index of 30 blue chips first closed above 10,000 one year ago Wednesday. In that time, the Dow is up 10.1 percent, while the Nasdaq has nearly doubled as investors chased the technology stocks that were previously expected to lead the economy's growth.
But for a week anyway, money fled high-growth companies. "It was bound to happen sooner or later," said Commerce Professor Pat Dennis.
Commerce Professor Richard DeMong saw little significance in last week's technology sell-off. He noted that the Nasdaq market has been extremely volatile as of late in addition to being well-overvalued.
"A lot of these companies, of which [Charlottesville based] ValueAmerica.com is the chic example, are in serious trouble because investors have been focused too heavily on growth potential as opposed to real earnings."
Dennis said, "Investors who have been pushing these stocks higher and higher started to panic at the end of the quarter when they saw each other selling. What followed was a cascade effect."
Illustrating recent volatility, eight of Nasdaq's top 10 losses came this year while nine of its 10 largest gains occurred in the same period.
The broader S&P 500, meanwhile, rose 1.19 to 1,508.65. Market breadth was mixed. Advancing issues led declining ones on the New York Stock Exchange 1,556 to 1,413 on volume of 1 billion shares. But Nasdaq losers beat winners 3,006 to 1,301, as more than 1.7 billion shares changed hands.
Analysts such as TheStreet.com's Justin Lahart cited no one catalyst behind the sell-off action, which comes amid a news void following last week's Federal Reserve interest rate hike and next month's earnings reporting season.
Some linked part of the technology slide to influential Goldman Sachs strategist Abby Joseph Cohen, who Tuesday reduced the weight of technology stocks in her model portfolio.
Others pinned the drop on technology stocks' loss of support from end-of-quarter buying that lifted them for much of March.
Finally, words from well-regarded money manager Mark Mobius added to the selling.
Mobius, of Templeton Funds, said a recent bout of volatility in Internet stock prices could herald the onset of a global crash in the high-flying sector, according to a Reuters report.
Dennis disagreed, maintaining that despite last week's profit-taking spree, all of tomorrow's market leaders are going to be high-techs.
"The fact that the Nasdaq rose a bit on Friday may indicate that market may bounce back as soon as next week due to investors who are buying on the dip," he said.
"Ultimately, however, increasing frowning upon of the practice of day-trading may lead to Nasdaq's lost momentum," he added, "Sophisticated investors might pursue strategies in which a well-researched company is instead bought and held. Trusted such options include buying on margin and application of derivative formulas"
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