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CNN Today

Bears Awaken From Hibernation, Sending Bulls in Retreat on Wall Street

Aired January 4, 2000 - 2:00 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

LOU WATERS, CNN ANCHOR: Wall Street is beginning the new year like a bear awakened from hibernation. The bulls are in retreat for the second straight day.

To find out what's going on and why, let's check in with CNN Financial editor Myron Kandel at the business desk in New York.

What's happening, Mike?

MYRON KANDEL, CNN CORRESPONDENT: Well, Lou, one of the biggest sell-offs in years is under way, and the turning of the calendar to a new year is one of the factors.

Let's take a quick look at the latest numbers. The Dow Industrials are plunging 256 points, the Dow at 11100. That's actually an improvement from where it was less than an hour ago. At its worst, the Dow was down almost 315 points. And this is an across- the-board sell-off. The big names are all sharply lower. IBM, General Electric and American Express all getting clobbered. And the number of declining issues is swamping gainers by nearly a three-to- one margin.

In percentage terms, it's even worse on the Nasdaq. That index is down 143 points for more than three percent, one of its biggest declines ever.

But let's keep this in perspective. The markets are coming off a great year, as a matter of fact, five great years, and some of what we're seeing today is profit-taking. Investors with big gains on some technology and other high-flying stocks were reluctant to sell in December because of the tax bite they would incur. But by selling now, investors won't have to pay those capital gains taxes until April of the year 2001.

The other major factor in today's sell-off is interest rates. There's a growing fear the Federal Reserve will continue to increase rates to slow down the economy. The irony is, this sell-off tied to the Fed comes the same day that President Clinton renominated Alan Greenspan to lead the central bank for four more years.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: For the past 12 years, Chairman Greenspan has guided the Federal Reserve with a rare combination of technical expertise, sophisticated analyst and old-fashioned common sense. His wise and steady leadership has inspired confidence not only here in America but all around the world.

ALAN GREENSPAN, FEDERAL RESERVE CHAIRMAN: My colleagues and I have been very appreciative of your support of the Fed over the years and your commitment to fiscal discipline, which, as you know and indeed have indicated, has been instrumental in achieving what in a few weeks, as you pointed out, will be the longest economic expansion in the nation's history.

(END VIDEO CLIP)

KANDEL: If approved by the Senate, and there's not much doubt about that, it will be Greenspan's fourth four--year term as Fed chairman -- Lou.

WATERS: And Mike, is there an upside about what's happening today? We understand that what goes up must come down so it can go back up. What's the thinking there?

KANDEL: Well, absolutely. And, you know, January is usually considered a pretty good month, because a lot of new money comes into the market from 401(k) plans and IRAs and other pension funds. Well, it may not have come in yet, because obviously yesterday and today big losers, but many people on Wall Street say this sell-off, they didn't expect it in this scope, but was a bit overdue, and they're looking for better things in the rest of this month, Lou.

WATERS: All right, thanks, Mike. Myron Kandel in New York. We'll continue watching the markets.

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