At a meeting today, money managers at Philadelphia's Rutherford, Brown & Catherwood began discussing the joys of Motorola vs. Nokia.
"At one point, we all just looked at each other," said partner Cummins Catherwood, who oversees $650 million in assets. "We realized that it was foolish to be talking about merits when that doesn't determine value anymore. Who knows what investors will do? I don't feel like buying either one right now."
Investors have been merciless about the slightest hint at profit shortcomings. Coupled with fears of interest-rate increases, it's making big money managers--the kind who claim they could look beyond that--jittery.
"We're developing a Wild West mentality: Shoot from the hip, ask later," Catherwood lamented. "I don't know where it came from, but it's the game now."
The Dow Jones industrial average, the leading barometer of blue-chip stocks, is off nearly 10 percent since its August high. The Standard & Poor's 500-stock index is down an equal amount since July.
And fears of inflation have sent the yield on the 30-year Treasury bond soaring to 6.32 percent, its highest level since October 1997. That's a level that analysts say makes bonds attractive alternatives to stocks.
"I wouldn't be surprised to see a 15 to 20 percent correction this year," said A. Marshall Acuff, chief investment strategist at Salomon Smith Barney. "And the next five or 10 percentage points are going to be more difficult than the first 10 percent."
Ironically, this doomsaying comes at a time when the economy appears to be booming. Earnings are increasing. Retail sales, according to a report released today, were up 0.6 percent in September. A report due out Friday on producer prices is also expected to be positive.
"A lot of people are waiting to see the producer price index," said Betsy Miller, chief equities trader at Black & Co. in Portland, Ore. "Some of them are acting on it now."
But all this good news is making investors concerned that the Federal Reserve will raise interest rates. Acuff, and other leading market watchers, believe that weakening bond prices could stave off an interest rate hike.
At the same time, though, rising bond yields could lure investors from the stock market. "The bond market is the culprit," Acuff said. "Not the government."
And investors are jumping at the mere hint of a problem. Unisys stock declined 37 percent today at the hint of earnings shortcomings. Tyco also took a tumble, despite denials by its chief executive of a newsletter's report that the company inflates earnings.
Apple Computer and Boeing beat Wall Street expectations, helping counterbalance the stock-market flight. The Dow today rose 54.45, or 0.5 percent, to 10,286.61, after falling as much as 98. The S&P 500 fell 2.13, or 0.2 percent, to 1283.42, after rising 20 and falling 34. The Nasdaq composite index rose 5.57, to 2806.84.
Eight stocks fell for every five that rose on the New York Stock Exchange, the sixth straight session in which declining stocks outnumbered rising ones.
Could it be the time of year? October is typically a rough month, what with third-quarter earnings and a roster of economic indicators being released. And Friday is double-witching day, when various options expire.
But, as Roselli notes, these events roll around all year long. "Don't say October to me," she said. "It's pure hype."
CAPTION: Rising Interest Rates (This chart was not available)