NEW YORK — Showbiz stocks took their lumps as trashed financial markets ended their second week of pain. Walt Disney, Viacom and Seagram all hewed to the big-stock indexes, while News Corp. came closer to the Nasdaq, which has fallen more than 27% over the past two weeks.
On Friday, the Dow Jones Industrial Average clocked its biggest point decline in history — 617.78 — and carnage continued unabated at the Nasdaq, down 355.49 or almost 10%. The Nasdaq party appears over for many formerly high-flying Internet companies — particularly the hordes of smaller cap players with no earnings. It’s a rout many had predicted, and some are calling the chaos a healthy correction to overheated markets fueled by so-called momentum investors, who ride stocks higher with no regard to fundamentals.
“It’s a fitting end to a horrendous week. You’re finally getting the devastation in technology and the Nasdaq that everyone feared,” said market strategist Barry Hyman of Ehrenkrantz King Nussbaum in New York on Friday.
Showbiz stocks follow pack
Entertainment pretty much followed the market. While the Dow was down 5.6% and Standard & Poor’s 500 index was down 9.5% over the past two weeks, Disney shares lost 5.8% to close at $38.87. The Mouse was shielded by its 100%-owned online spinoff, Go.com, which took the brunt of the selling, plunging 37% over the period to $13.
“Disney also has Regis Philbin,” says one fund manager, referring to the host of the smash ABC hit “Who Wants to Be a Millionaire.”
Seagram shares were off 8.7% for the two weeks, closing at $54.32. A number of Wall Streeters said they’ve started to consider Seagram a “special situation” stock, kept from catastrophic harm on expectations of a takeover or major deal.
Viacom was down 6.75% to $49.19 as investors remain enthusiastic at the conglom’s upcoming merger with CBS.
“I think this group, relative to a lot of other names, has actually done pretty well,” notes Mark Greenberg, of the Invesco Leisure Fund.
Shares and shares alike
Time Warner was down 18.75% for the two weeks to close at $81.25 as that company now tracks its Internet partner America Online, down 18.2% to $55.
News Corp. dropped 20.6% to close at $44.69, which includes a loss of nearly 8% on Friday alone, a day when the Dow lost 5.7% of its value as the market’s recent downtrend was exacerbated by economic data that convinced many on Wall Street that higher interest rates are in the cards. Some had hoped weak financial markets might convince the Federal Reserve to leave rates alone at its next meeting May 16, but many now feel that’s unlikely.
The Fed chairman himself, Alan Greenspan, weighed in Friday, noting that bouts of “ruptured confidence are integral to the way our economy and our financial markets work.”
One thing’s for sure, old-media execs are thinking twice about chucking their day jobs for online startups. Others who dove into the Internet frenzy recently can start to wallpaper the living room with stock options.
Internet startup conflagration
“If you went public at $6 and the stock went to $50 — and your options are at $50, but the stock’s back at $6, you’re probably having a very tough conversation with your wife or husband,” one fund manager said. He went on to single out ArtistDirect, a network of music Web sites, which went public in mid-March to hit a high of $12.75; it closed Friday at $3.44.
Once public, “a lot of companies out there are talking about doing deals. They have to sell stock to finance themselves. If they can’t sell stock, life is not good,” he added.
The question is what happens next? Pundits are predicting anything from a major upswing to further losses, with the consensus on the latter. But they also see bargains. “I’m all on the buy side,” Hyman said, noting “all those quality names” — Intel, Cisco, AOL — that were too expensive before but are eminently affordable now.