During Wall Street's drastic plunge yesterday, stocks of
San Diego companies mirrored the downward path of the broad market.
In a day when the Dow Jones industrial average, Nasdaq Composite Index and Standard & Poor's 500 index lost between 3.4 and 3.9 percent of their value, the Bloomberg San Diego stock index suffered a 3.75 percent loss.
Some
San Diego stocks fell far lower than the market average.
Qualcomm shares slid more than 5 percent; Maxwell Technologies, NuVasive medical devices and Biomed Realty Trust lost more than 6 percent; PICO Holdings and Wireless Facilities dropped more than 7 percent; and WebSideStory dropped more than 9 percent.
In all, 105 out of the 108 stocks on the
San Diego stock index lost ground. The index includes all stocks from San Diego County traded on major exchanges, but does not include so-called penny stocks. Most local stocks trade on the tech-laden Nasdaq exchange.
“
San Diego has a lot of tech stocks. And tech stocks get hit particularly hard in trading like this,” said Bud Leedom, publisher of the California Stock Report.
“In this kind of market, people become risk-averse, and tech stocks are seen as risky,” Leedom said. “There's nothing to say that those stocks won't continue to get hurt.”
Beyond the traditional “flight to quality” during a crash, some local companies were saddled with their own problems. Liz Rappaport, markets columnist for The Street.com, suggested that a reason for Qualcomm's drop is its tight ties to
– an economy that suddenly seems shaky after yesterday's 8.8 percent drop on the Shanghai Composite Index.
Rappaport noted that other companies with ties to
, led by Goldman Sachs and CDC Software, also saw sharp drops in their stock price yesterday.
Qualcomm has spent years trying to make inroads into the Chinese marketplace. Last year, for instance, Chief Executive Paul Jacobs boasted that the company expects to see “a huge market” for third-generation wireless devices in
.
More recently, however, Jacobs has sounded less optimistic about
. He told Reuters this month that he has given up trying to predict when Qualcomm will get licenses there.
“It heats up, then it cools off,” he said.
Wall Street was also shaken by a warning from former Federal Reserve Chairman Alan Greenspan that a recession is possible – although not necessarily likely – by the end of the year.
Local economists are skeptical of the recession threat.
“If really tanks, that could certainly affect the
, since they're underwriting a lot of our debt,” said Kelly Cunningham, economist with the San Diego Institute for Policy Research. “But even though I think we're in for a slowdown, I don't see the
falling into recession.”
Another concern is the shakiness in the housing market, with an increasing number of home buyers defaulting on their loans, particularly in the sub-prime mortgage market. Accredited Home Lenders of San Diego shares dropped 2.44 percent yesterday, capping three weeks of decline, and Realty Income Corp. fell 3.78 percent. Both companies are heavily involved in the mortgage market.
The only local companies that gained ground yesterday were Natural Alternatives in San Marcos, which makes nutritional supplements; Phoenix Footwear in Carlsbad, maker of Tommy Bahama shoes; and CryoCor, a San Diego medical device maker.
Some non-tech stocks, such as First PacTrust Bancorp and Rubio's Restaurants, held their own, sliding less than a fraction of a percent during the downturn.
James Welsh, who heads Welsh Money Management in
Carlsbad , predicted that stock prices in general may rise this week on Wall Street, which would not be uncommon after a major decline. The
Shanghai exchange, for instance, had a slight rebound in trading early today.
But Welsh forecasted more slippage in the days ahead.
“I think we're going to see more weakness, but I doubt that we're going into a bear market,” Welsh said.
Welsh's most recent financial newsletter forecast a drop of between 4 and 7 percent for the stock market in the first quarter. “Unless something unexpected happens, I still think that will be the extent of the correction,” he said.
Leedom suggested that if stocks rise, it could be a time for investors to sell.
“The market will try to make some kind of rally, which could be a time to take some money off the table and to pare down portfolios that have too many equities,” he said.
On the other hand, Art Hogan, chief market strategist at Jefferies & Co., suggests that if stocks dip any lower, it could be a good time to invest.
“A lot of folks have stayed on the sidelines precisely because there hasn't been a correction in the past year,” he said. “Now is their opportunity to get in.”
