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Stock Watch: Investors Take Off New Year's Party Hats as Market Tumbles

Aired January 2, 2001 - 2:01 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: Falling stock prices and shrinking 401(k)s are getting the full attention of Main Street investors these days, as you know. Could the new year bring new optimism to Wall Street, or will 2001 bring more of the same? The Dow and Nasdaq opened for the first time in the new year today. And from the looks of things, you can take off that New Year's party hat.

CNNfn's Myron Kandel is in New York.

What's happening, Mike?

MYRON KANDEL, CNN FINANCIAL EDITOR: Well, nothing good, Lou, I'm sorry to say. The market is really tumbling today. If we look at the screen at the New York Stock Exchange, we can see the damage there, the Dow industrials down 131 -- 130 points. That's about 1 1/4 percent of its value for the Dow Industrial Average. And we look at the Nasdaq composite, it's hurt even worse on a percentage basis. It's down 133 points, and that's more than 5 percent.

If you recall what happened in the year just past, the Dow was down about 6 percent for the year. The Nasdaq, however, was down a record 39 percent.

What's happened at the Nasdaq is that tech stocks that make up the bulk of the Nasdaq composite were really hit hard. And obviously they're starting the new year getting hit as well, Lou.

WATERS: What are investors -- what would be the best advice for an investor now since we heard some advice at the end of the last year that cash is king now, hold on to your cash, wait for a decision by the board at the Fed about interest rates and then get into the market?

KANDEL: Well, the one bright spot, Lou -- I think you put your finger on it -- is that the Fed is expected to cut interest rates. The next meeting of the Fed is at the end of the month. There's some people that think the Fed, which it can do, could cut rates even before then. And that's a reaction more to the slowing economy rather than the falling stock market.

As I indicated, those tech stocks that make up the Nasdaq were hit really hard. Consumers were slowing their purchases of PCs and companies were slowing their purchases of technical equipment -- all the technology equipment that's helped our productivity as a nation.

But, you know, to put it in perspective, true, the Nasdaq was down 39 percent last year, and that was the most in its history. But the year before, the Nasdaq was up nearly 86 percent.

So we have to put it in a little bit of a perspective, but there's no denying that the new year is starting off on a very down- beat note, Lou.

WATERS: Myron Kandel in New York.

And are you willing to ride out the market waves, or is time to get out? We'll put that question to one of the Motley Fools, which is a Web site devoted to helping investors. That interview will come up in about 10 minutes.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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