business

Average investors have gotten used to wild swings in the past year's volatile stock market.

But even for them, Tuesday was an unsettling ride. Small talk at Wes Carlson and Mike Anderson's telecommunications firm centered on the 464-point tumble of the Dow Jones industrial average in early trading.

"It's a little scary because we don't know how much it's going to go down or if it's going to continue to slide or what," said Anderson of the stock market's five down days in a row.

The Federal Reserve's decision to lower interest rates by 0.75 percentage point reversed the market's slalom, with the Dow rising more than 300 points from the day's low to close down 128 points, or about 1 percent. The Standard and Poor's 500 ended the day down about 15 points, or 1.1 percent. Both have lost more than 15 percent from their October peaks.

But Tuesday's events did nothing to alter Anderson's mood about the economy. He worries that high oil prices and the credit crisis will cause a global downturn. "I think it's going to be a sad day eventually for the world economy," said the New Hope resident.

"They don't want to use the 'r' word yet, but we're in one, I think," added his co-worker Carlson.

Carlson was talking about a recession. That was the fear Monday when world markets plummeted amid concern that an economic slowdown in America is inevitable and that it might spread. (U.S. markets were closed Monday for the Martin Luther King Jr. holiday.)

On Tuesday, Japan's stock average ended the day down more than 5 percent, and in Hong Kong, stock losses approached 9 percent. But most European markets climbed out of negative territory after the Fed's announcement.

U.S. markets also reacted to Bank of America and Wachovia blaming the credit crisis for fourth-quarter earnings that fell 95 percent and 98 percent, respectively. Minnesota health insurer UnitedHealth Group and blue chip Johnson & Johnson reported profits up during the period.

Financial advisers across the Twin Cities braced for a busy day Tuesday.

"Bottom line is, you answer the phone," said Gregg Cummings, a certified financial planner with Smith Barney. "There's panic in their voice" as they remember the beating their stocks took during the last bear market of 2000-03. A bear market is considered a market decline of 20 percent or more. But Cummings reminds them of their long-term strategy and why now's not the time to be selling stocks at what could be the bottom of a market correction.

Lots of opportunities

Martha Pomerantz, an investment principal with Lowry Hill Private Wealth Management in Minneapolis, said her clients learned to stay the course and ignore daily market moves from the dot-com crash and its aftermath. "When you should be most optimistic, honestly, is right now. When people are feeling the bleakest about things, and it seems like there's no good news, there are probably lots of opportunities," she said. "I think everything looks cheap right now," in particular the stocks of large, high quality companies that have been "underappreciated" as U.S. investors flocked to overseas markets.

Manny Castillo of St. Paul said the market's steady decline since the new year must be blamed on "emotion and psychology, because the fundamentals are good." He wishes he had moved more money out of stocks to preserve his portfolio's value, but "they're good companies so [eventually] they'll come back." The environmental analyst also believes that recession fears driving the market are overblown. "Ninety-five percent of the people who want to work are working."

Kris Scott of Blaine worries daily about her dwindling retirement account. The 46-year-old had $114,000 at the peak last year and when she looked Tuesday it was about $99,000. "I know I shouldn't look at it every day, but I do." Her fear: If the market keeps dropping she'll have to prolong her career as a legal secretary.

Keith Tufte, president of Longview Wealth Management in Eden Prairie is optimistic that Tuesday's market drop "was the cathartic, selling climax around the world" and hopes it will get better from here.

But the former hedge fund manager did not spend the day trolling for short-term deals. "I'm just preaching: Ride it out, things will be fine. This has happened many times in my 22 years that I've been watching the market, and always the lesson you learn a month later is you should have just done nothing."

Kara McGuire • 612-673-7293