NEW YORK — Stocks resumed their free fall Wednesday and showbiz shares took their licks too, albeit with milder losses than they faced earlier in the week.
On Monday, media stocks plunged — underperforming overall markets even as the Dow Jones Industrial Average and the Nasdaq lived through one of the worst trading days in years. After a tepid rally Tuesday, the DJIA dropped 3% Wednesday, falling below the key benchmark level of 10,000.
Among entertainment stocks, AOL Time Warner dipped 1.6% to close at $40.04, Walt Disney fell 3.3% to $27.09, and Viacom eased 0.8% to end the day at $45.55. These are three stocks some on Wall Street are recommending longer term for their diverse revenue streams, despite the current carnage. “When the tide turns, the stocks can move up dramatically and quickly,” UBS Warburg analyst Chris Dixon predicted.
Vivendi was down 5.3% at $60.05 and News Corp. only lost 0.3% to close at $32.45.
Not good, but not terrible
“It was not a good day, but it ended up a lot better than most people feared,” one media analyst said.
Entertainment shares have been hit by a slower U.S. economy and advertising market, as ads provide a big portion of their revenue. They didn’t bear the brunt of the market’s ire Wednesday, however, as investors focused on Japan and fears that looming bankruptcies at large financial institutions there threaten a global chain reaction.
The Federal Reserve Bank may give the market a breather Tuesday when it is expected to lower interest rates by as much as three quarters of a point in an attempt to head off a recession.
Wall Streeters aren’t sure that will be enough to reverse the market’s deepening pessimism. “We’ve seen the law of diminishing returns on Fed action,” one analyst said. And lowering rates isn’t a particular investment catalyst for entertainment companies, which don’t have overwhelming amounts of debt. “They are not interest rates proxies,” he added, and their performance is particularly tough to predict.
“It’s not like steel or something where they all move together. They are all getting beat up because of the economy and advertising, but they all move because of their own dynamics,” he said.