NEW YORK -- The near obliteration of Enron shares this past week surprised and upset many on Wall Street. But the broader market was unscathed -- stocks dipped lower as investors sold to collect profits from the recent rally, not because of Enron.
Analysts say the lack of reaction reflects Enron's particular circumstances, as well as a growing confidence among investors that an economic recovery will occur sooner rather than later.
"The impact on the market was not terribly significant in general. This was a problem specific to Enron," said Stuart Freeman, chief equity strategist at A.G. Edwards. "As for any pullback, I would really have expected that, with or without Enron, we'd see some profit-taking. The market has rebounded significantly since September."
It's not unusual for bad news from big companies to trigger broader selling. Rulings against Microsoft in the government's antitrust case helped send stocks lower in the first half of 2000. A revenue warning from Intel that September prompted investors to unload shares across the market.
But in those cases, analysts said, investors viewed each event as potentially having broad ramifications for stocks because the two high-tech firms and their products have become integral parts of the economy.
That didn't happen this time because Enron's problems, which grew out of unorthodox business arrangements and questionable accounting, appear to be limited to the company itself. The value of its stock was further hurt by fears that the company was headed to bankruptcy court. That fear inspired a rush to unload their shares, since stock is generally worthless in a bankruptcy.
Enron stock ended the week down $4.45 at 26 cents, a loss of nearly 95 percent from the previous Friday. It had traded above $80 per share within the last year.
Moreover, "Enron also wasn't as broadly an owned stock by individual investors as Microsoft or some of the other technology stocks," said Robert Streed, portfolio manager of Northern Select Equity Fund in Chicago.
He also believes investors were reassured by the fact the Federal Reserve is and has been taking steps to keep markets moving smoothly since the Sept. 11 terror attacks.
That's not too say the Enron collapse wasn't felt in the market. On Wednesday, the day Dynegy Inc. backed out of an acquisition deal with Enron, the stocks of bankers J.P. Morgan Chase and Citigroup fell sharply. Both had worked unsuccessfully on the deal. By Friday, the banks were still trading well below where they started the week.
"This had an impact on financial and brokerage stocks, specifically those that people were concerned had risk because of their relationship with Enron," said Tom Galvin, chief investment officer at Credit Suisse First Boston.
He attributed most of the market's losses this past week to an expected pullback from the big rebound following the post-Sept. 11 selloff. The Dow Jones industrial average has risen 19.6 percent, the Nasdaq composite index is up 35.7 percent and the Standard & Poor's 500 index has gained nearly 18 percent.
Stocks are now roughly where they were at the end of August. So are investors -- they're waiting to hear companies' forecasts for 2002 before doing much more buying.
"I would say this is all very positive," Freeman, the A.G. Edwards strategist said. "While it doesn't mean we're starting a new bull market, investors definitely appear to be voting for stocks and to have such a broad advance forward is very encouraging."
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