2nd Quarter 2002: Stock Index Preliminary Report; U.S. Broad-market Index Posts 4th Worst Quarter in 20 Years; Small-cap Value Index Performs Best of Russell's 21 Indexes.Business Editors The U.S. broad market, as measured by the Russell 3000(R) Index, suffered one of its worst quarterly losses ever during the second quarter. The Russell 3000 lost 7.3% in June and 13.2% for the quarter. Only three quarters in the 23-year history of the index ended worse: The third quarter of 2001 (-15.6%), which included the Sept. 11 terrorist attack; the third quarter of 1990 (-15.2%), during which Iraq invaded Kuwait; and the fourth quarter of 1987 (-23%), which included Black Monday Black Monday, Oct. 19, 1987, in U.S. history, day of financial panic. The Dow Jones Average fell 508.32 points, a drop of 22.6%, the largest since 1914. The point decline as well as the volume, 604.33 million shares, exceeded previous records. . "But unlike those spectacular event-driven declines of the past, this quarter's negative performance happened gradually," said David Hintz, senior research analyst. "The quarter was filled with mixed signals about the economic recovery, which simultaneously raised investors' hopes as well as some red flags. For investors, it was like pulling up to a traffic signal and finding both the red and green lights shining at the same time. In the end, they put on the brakes." The technology (-26%), utilities (-20%) and healthcare (-15%) sectors declined throughout the quarter, pulling the broad-market index deep into the red for the first time in three quarters. Hintz added that the Russell 3000 ended the quarter at its lowest point in 15 quarters. Though the index dipped to a lower point within a quarter (after the Sept. 11 terrorist attack), it hasn't ended a quarter this low since the third quarter of 1998. "While many managers thought the market was pretty well 'picked over' six months ago (after the 4th quarter rebound) they say it's a lot easier to find good values now," Hintz said. With the sustained decline of the broad market, the index now has reflected negative market performance for six of the past 12 quarters. Small-cap value stocks Value stocks Stocks with low price/book ratios or price/earnings ratios. Historically, value stocks have enjoyed higher average returns than growth stocks (stocks with high price/book or P/E ratios) in a variety of countries. outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. The decline touched every corner of the market as none of Frank Russell Frank Russell may refer to the following people:
Other value indexes, including the Russell 2500(TM) Value Index (-4.5%) and the Russell Midcap mid·cap adj. 1. Or or relating to corporations whose retained earnings and outstanding shares of common stock have a value between those of small cap companies and large cap corporations. 2. (R) Value Index (-5.5%), also performed relatively well for the second quarter. "Having exposure to medium- and small-cap stocks helped value managers," said Hintz. "But tech stocks, regardless of the capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. tier, didn't fare as well." However, small-cap technology stocks took a pounding in the second quarter, losing 30% in the Russell 2000, 34% in the Russell 2000 Growth Index and 21% in the Russell 2000 Value Index. Likewise, large-cap technology stocks lost 27%, as measured by the Russell 1000(R) Index, and in the broad-market, technology took a 26% hit. Two Sectors Fare Better Two sectors in the Russell 3000 -- materials & processing and consumer staples Consumer Staples The industries that manufacture and sell food/beverages, tobacco, prescription drugs, and household products. Notes: Proctor and Gamble would be considered a consumer staple company because many of its products are household and food related. -- held up relatively well during the second quarter, declining only 3.8% and 3.7%, respectively. "Like technology, these two sectors performed consistently at every capitalization level, though with a much better result for investors," said Hintz. He added that investors seemed to gravitate grav·i·tate intr.v. grav·i·tat·ed, grav·i·tat·ing, grav·i·tates 1. To move in response to the force of gravity. 2. To move downward. 3. toward the consumer staples sector, which they perceived would offer more predictable or stable earnings. "Investors sought stocks that would be less likely affected by accounting scandals Accounting scandals, or corporate accounting scandals are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. and less sensitive to conflicting reports on the economy," he said. In the large-cap Russell 1000, materials & processing and consumer staples each decreased only 3.8%. Likewise, in the small-cap Russell 2000, materials & processing (-3.5%) and consumer staples (0.3%) turned in relatively good performances for the quarter. By contrast, financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. (1.7%) ended the second quarter with the best performance in the Russell 2000 but ranked fourth in the Russell 1000 with a -8% return. "Diversification with these sectors and exposure to small-cap and value stocks helped some investors mitigate or contain the damage to their portfolios," said Hintz. Russell indexes Russell Indexes US equity index widely used by pension and mutual fund investors that are weighted by market capitalization and published by the Frank Russell Company of Tacoma, Washington. serve as performance standards against which money managers and mutual funds can be evaluated. Russell estimates $850 billion of assets are benchmarked to Russell indexes. In addition, more than $214 billion is invested in passive index funds that use the Russell indexes as their model. Frank Russell Company, a global leader in multi-manager investment Multi-manager investment is an investment product that consists of multiple specialized funds. Each specialized fund may invest across different sectors and markets, or having managers investing in the same asset class but have different investment styles. services, provides investment products and services in more than 35 countries. Russell manages $70 billion in assets and advises clients worldwide representing US$1.8 trillion. Founded in 1936, Russell is a subsidiary of Northwestern Mutual and is headquartered in Tacoma, Wash., with additional offices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Toronto, London, Paris, Singapore, Sydney, Auckland and Tokyo. For more information, go to www.russell.com. Frank Russell Company, a Washington, USA corporation, operates through subsidiaries worldwide. |
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