Asia Market Turmoil, Profit-Taking Send U.S. Stocks Spinning
A witches' brew of events, from growing turmoil in markets in Southeast Asia to an overvalued U.S. market and fund managers trying to lock in profits, wreaked havoc on Wall Street yesterday.</br></br>"We've got a global market swoon going on here," said Bruce Steinberg, a Merrill Lynch & Co. economist, of the 7.2 percent drop in the Dow Jones industrial average, which closed at 7161.15. "Asia hit a wall. And that transmits to the rest of the world." "It's a one-way market right now -- and that way is down," said Steve Roach, a Morgan Stanley Group Inc. economist. "We're in a mini-panic. There aren't a lot of natural forces of stability."</br></br>But economists were quick to caution that the panic was not justified by activity in global markets. "Events in Asia mean that growth is slowing, but not that it's stopping," Steinberg said. "The worry here has been that growth was too fast."</br></br>Roach, who just returned from two weeks in Asia, said the importance of events there to U.S. markets has been overblown. "The numbers show that if there's a real slump in Asia, our GDP {gross domestic product} will be off one-fourth of a {percentage} point," he said.</br></br>Some analysts have argued for months that the prices of U.S. stocks were overvalued compared with their earnings, and that the market wouldn't sustain them. After yesterday's plunge, they said that many companies' values were close to where they should be.