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Wall Street whipsaw echoes investors’ battle between confidence and angst

Timothy Nick worked the floor of the New York Stock Exchange on Wednesday. The chart behind him showed the day’s ups and downs. The Dow and other indexes have given up their gains of recent months.
Timothy Nick worked the floor of the New York Stock Exchange on Wednesday. The chart behind him showed the day’s ups and downs. The Dow and other indexes have given up their gains of recent months. The Associated Press

Wall Street’s whipsaw action Wednesday echoed the battle between money managers’ confidence and rising angst about Europe, Ebola, Russia and more.

The Dow Jones industrial average fell 2.8 percent during the day, only to see much of the damage repaired by the close of trading.

“What a day,” said Rich Jones, a portfolio manager at Mitchell Capital Management in Leawood. “I left lunch and it was down 450 (points). My shoulders were slumped. I got back here and was just shocked.”

It took a 286-point rally to leave the blue chip stock index 173.45 points lower for the day at 16,141.74. Apart from the wild ups and downs, it was a relatively common 1 percent loss in a 15-trading-day stretch that has seen seven swings of 200 points or more.

Still, the Dow is off 2.6 percent so far this year. The broader Standard & Poor’s 500, which fell 15.21 points to 1,862.49, and the Nasdaq, which fell 11.85 points to 4,215.32, cling to gains of less than 1 percent this year.

The damage has come since all three indexes hit highs Sept. 19. Since then, many stocks are down, including such Kansas City names as H&R Block, Sprint and Commerce Bancshares, which have fallen 11 percent. Waddell & Reed Financial has dropped 17 percent.

During the decline, investors have had plenty to worry about. Ebola’s spread to a second nurse in Texas contributed to a 17 percent drop in airline stocks Wednesday because of concerns about whether restrictions on travel will come.

Wal-Mart Stores cut its own sales forecast and predicted slower profit growth for the next three years. And a morning report said retail sales fell more in September than economists had expected.

Europe’s economy is weakening under the strains of sanctions from Russia and the uncertainty Russia’s Vladimir Putin injects into geopolitics. Some fret that the continent could slip back into recession.

Hong Kong’s political unrest, China’s slumping property values and Japan’s dip in industrial production round out the picture.

“I think it’s fair to call it a global growth scare right now,” said Bill Stone, chief investment strategist at PNC Asset Management.

Wednesday’s rally represented confidence that the U.S. economy will stand up to these problems, that corporate profits will continue apace and that the Federal Reserve will maintain its support for the economy.

“We are the standout,” Jones said.

Others also say this market decline amounts to an inevitable correction in the stock market, which has been on a long climb for more than two years. A correction generally means a 10 percent drop in a market, though broad indexes haven’t fallen that much from their recent heights.

“I am super bullish,” said portfolio manager Kent Gasaway at Kornitzer Capital Management, which runs the Buffalo Funds. “This correction is a great buying opportunity.”

Gasaway cites the U.S. economy’s robust growth in the second quarter and expectations that growth was “pretty strong” in the just completed third quarter. Cheap oil means lower gasoline prices and money in consumers’ pockets, he said.

Bill Greiner is still looking for that buying moment for clients at Mariner Holdings, where he is chief investment strategist.

“There are plenty of wild cards out there,” he said.

Early this month, managers of the American Century Global Asset Allocation Fund bought a bit of insurance against stock market volatility and a possible slide. Rich Weiss, a senior portfolio manager overseeing $25 billion, said the insurance was inexpensive and has paid off. But he doesn’t see enough risk to back away from the fund’s overweighted investment in stocks.

“Ultimately, we’re still in the (economic) recovery. What’s going on today is not going to deny that, as dismal as things look,” Weiss said.

Bloomberg News and The Associated Press contributed to this report.

To reach Mark Davis, call 816-234-4372 or send email to mdavis@kcstar.com.

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