Investors face a jittery weekend following the stock market's 190.58-point plummet Friday - the second largest plunge in the history of the Dow Jones industrial average.
The Friday the 13th dive is topped only by the spectacular 508-point crash Oct. 19, 1987.Although the point loss makes this the second largest crash in history, the percentage fall of the market Friday is only the 12th worst since the Dow average was expanded to 30 stocks in 1928.
The crash two years ago pulled the market down 22.6 percent. But Friday's crash pulled the market down only 6.91 percent.
Friday's tumble is more likely to hurt institutions than individuals. "Ever since the crash two years ago, the stock market has been much more of an institutions market used by pension plans, insurance companies, etc.," explained Michael Tullis, vice president of Smith Barney in Salt Lake City.
"Individuals have been very scared to get back into the market. There isn't anywhere near the number of individual investors this time around that there was in October 1987," Tullis said.
The label "second largest drop in the history of the Dow" sparked a few jests.
"We're on the ground floor so it won't do our brokers any good to jump out of these windows," said Don Larkin, vice president of Piper Jaffray & Hopwood's Salt Lake office.
But in many ways Friday's plunge is genuinely reminiscent of the Friday plunge two years ago that preceded the historic Monday crash.
Two years ago, the market plunged 108.35 points on Friday, Oct. 16. When the market opened the following Monday, the Dow took its unprecedented 508-point dive.
But analysts don't think that will happen this time.
"Unless some news of the end of the world comes out over the weekend, the market will regain its sensibility by Monday," said Alfred Goldman, market strategist with A.G. Edwards and Sons Inc. in New York City.
Hildegard Zagorski, market analyst with Prudential-Bache Securities Inc., agreed. Zagorski said she expects a selloff when the market opens Monday, "but nothing major."
If panic does ensue, then stocks on the secondary, or over-the-counter, markets may be hit hard on Monday and Tuesday, local traders said.
The national and local over-the-counter issues were not affected much by the Big Board's drop Friday. "All the deal stocks (those whose value hinges on a takeover) got hit, and there was some impact on the high profile over-the-counter stocks," said a trader at Wilson & Davis.
Friday's emotional selling was blamed in part on investors' October jitters. The "proximity to October 1987 unnerved people," Zagorski said.
She doesn't see any similarity between Friday's events and the October 1987 crash.
"The circumstances are different," she said. The Federal Reserve is not tightening monetary policy as it was in 1987. "Price-earnings ratios are much lower. Interest rates are lower. The whole economic picture is much better," she said.
Local managers of brokerage houses saw an opportunity to buy amid the rage to sell.
"If we see additional weakness on good quality stocks, I'll be a buyer," said Larkin.
Some of Larkin's clients were calling late Friday with instructions to buy, he said.
"Most individual investors know they really blew it by not getting back into the market the week after the crash," Tullis said. "They may see this as their redeeming chance."
Goldman also sees opportunity in the tumble. "When stocks are being thrown out the window, it's a good time to have a bucket and catch them," he said.
A local trader said if the panic continues Monday he will take advantage of it by buying high dividend yielding stocks.
Friday's frantic selling was triggered by the news that investors trying to buy UAL Corp. had been unable to secure financing for their $6.75 billion bid.
UAL Corp. is the parent company of United Airlines. United Airlines employees and British Airways had joined forces to buy the company.
The failure to get funding sent shock waves through the market, sparking panic about the health of the junk bond market.
"All of a sudden, Wall Street was consumed by deja vu of October 1987 and panic that we're facing another October (crash) two years later _ and started dumping stocks at any price," said Goldman said.
He acknowledged the market's fears about the use of junk bonds to finance takeovers, but pointed out that "UAL is one company with one problem. This isn't enough to knock the market down 200 points," he said.
Junk bonds are high-risk bonds that have been used to finance numerous takeovers in the past two years. They have been the driving force behind the market's recovery since the crash in 1987.