I know the market hates uncertainty, but this is ridiculous.
Since last Tuesday’s close – the final day of trading before the presidential campaign went into overtime – stocks in general, and tech stocks in particular, have dropped faster than the credibility of television networks that flip-flopped on calling a winner in Florida.
Through late-morning trading on Monday, the Nasdaq was at 2890.43, down 15.4% from Tuesday’s close of 3415. Unless it pulls off a miracle afternoon rally, the tech-heavy Nasdaq is a cinch to finish below Friday’s 3028, this year’s low closing price.
Internet stocks have suffered even more, with internet.com’s Internet Stock Index, or ISDEX, falling 21.5% since Tuesday to 515.65 by noon on Monday, its lowest level of the year.
It’s not just the depth of the election-related stock plunge that’s so scary, it’s the breadth. In Monday’s trading, for example, all 50 ISDEX stocks were lower as of noon.
This frenetic meltdown activity comes after a two-week surge by Internet stocks that had finally given investors hope that an elusive fall rally was, at last, materializing. Those brief heady days now feel like ancient history.
Various news stories in recent days have tended to attribute the market’s freefall to uncertainty over the presidential voting results and either 1) general concerns about earnings reports, or 2) specific concerns about earnings reports and forecasts (Dell, Cisco, Hewlett-Packard – take your pick).
Forget the earnings worries; this is all about the election. If Bush or Gore concedes on Monday, I guarantee the market would soar on Tuesday, earnings or no earnings.
Unfortunately, it’s unlikely there will be a resolution before Friday, the deadline for absentee ballots in Florida, and all indications are that the stock market will continue to plunge each day until a new president is determined.
That, in turn, will bring incredible pressure to bear on one nominee or the other to concede. Right now the heat is on Gore, who still (barely) trails in the Sunshine State vote. However, if hand-counting and absentee ballots put Gore in the lead by Friday, it will be the Bush camp that must decide whether to further contest results in Florida and elsewhere or throw in the towel.
Either way, don’t expect a drawn-out constitutional crisis. There’s simply too much money at stake for both parties to allow that to happen.