Newspaper article THE JOURNAL RECORD

Some See a Sea of Change for Stocks

Newspaper article THE JOURNAL RECORD

Some See a Sea of Change for Stocks

Article excerpt

NEW YORK -- Amid the waves of volatility that have rocked the stock market in recent weeks, some Wall Street analysts say a tidal shift of more lasting significance may have occurred.

If they are right, small stocks may be ready to displace the big- name blue chips as market leaders, reversing the trend of the past several years.

It will take more than a few weeks' market action to determine for certain whether any such sea of change has taken place. But there's no disputing which stocks took most of the pounding in the August decline.

From its peak in early August through its low just before the end of the month, the Dow Jones average of 30 blue-chip industrials fell 6.8 percent -- more than twice the 3.0 percent loss recorded by the Nasdaq composite index of what used to be called the over-the-counter market.

An even greater contrast shows up in preliminary monthly performance statistics kept by CDA Investment Technologies in Rockville, Md. Index funds modeled on the blue-chip-dominated Standard & Poor's 500-stock composite index fell 5.47 percent during the month, while "small cap" stock funds gained 1.86 percent.

S&P 500 index funds still hold an edge on small-cap funds for the year to date, but the gap has closed dramatically.

"When one small segment of the market outperforms the rest for an unusually long period of time, it is inevitable that it will fall from grace," said Fred Taylor, chief investment officer at New York's U.S. Trust. "Of late, the unavoidable shift away from large-cap blue chip stocks has sent the market on a roller coaster ride."

"The bigger they were the harder they fell," observed Peter Canelo, an analyst at Morgan Stanley, Dean Witter Discover. "If corrections mark a change in market leadership, this one may be signaling a shift from large, expensive consumer multinationals to smaller, cheaper, more economically sensitive stocks. …

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