Broad Band: Nasdaq Stocks' Swings Are Unprecedented -- But Taken in Stride --- Instant News, Online Trades, Momentum Investing All Increase the Volatility --- Consumers Are Not Spooked
John Schott loaded up on biotechnology stocks last year, then watched them soar fourfold. He sold a few but held on to most -- only to see the prices cut in half in a matter of days.</br></br>His reaction: Easy come, easy go. "All through the '90s we've tended to have these rolling crashes," says the 62-year-old suburban-Philadelphia investor. "That tends to inure you to the whole thing."</br></br>Without question, the volatility in stock prices is unprecedented. Last year, the Nasdaq Composite Index moved 2% or more on a quarter of the trading days. That was the most in the Nasdaq Stock Market's 29-year history. But this year is more volatile still: More than half of the trading days have seen the index close up or down by at least 2%. Yesterday, it swung all the way from being up 3.8% to being down 2.5% at its close of 3676.78. Even the Dow Jones Industrial Average, representing established, blue-chip stocks, is fluctuating the most it has in a decade.</br></br>Investors had better get used to it. The broad embrace of "momentum" investing by big and small investors alike, the growth of technology stocks that are intrinsically volatile, and the Internet's instant news and inexpensive trading all suggest that the market is becoming more susceptible to sudden surges and swoons.</br></br>How much does this volatility really matter? Clearly, that depends partly on where stocks go from here. With its 27.2% sell-off since its March 10 high, the Nasdaq Composite is in what Wall Street customarily calls a bear market, but it is still up 45.8% from 12 months ago.