Traders shaky after dark Friday

NEW YORK - After Wall Street's worst day in almost three years on Friday, stock traders headed home to lick their wounds and settle in for a weekend of worry.

"What a blood bath," exclaimed one trader.

He said the first thing to do was to step back and figure out if this week's opening presented any buying opportunities.

"If it steadies here, and bargain hunters come in, it'll all be forgotten," said Rick Meckler, president of LibertyView Capital Management, in Hoboken, New Jersey.

"But if you see some accelerated selling, that'll be when people begin to question whether this is the start of a real downtrend."

Friday's sell-off left the blue-chip Dow Jones industrial average down almost 2 per cent and brought a 2.4 per cent drop in the Nasdaq Composite Index.

The fall comes as investors face a storm of worries, including disappointing earnings reports from corporate titans Citigroup and General Electric and a spike in United States light crude oil futures to US$68.45 ($100.92) a barrel, their highest level since early September.

Stocks often bounce back after selling off in response to non-financial news like security threats or weather catastrophes.

Equities traders are worried the volatility might scare some investors out of stocks and into other assets. US interest rates have been rising for more than a week and commodities ranging from oil to gold have also climbed.

"The alternatives to equity investment today, when money market rates are as high as they are, are much different than they were a year ago," said Meckler.

"It gives people more of a choice when there is some bad news."

While stocks plummeted, gold hit a new 25-year high of US$568.50 an ounce before profit-taking caused gold futures to finish lower.

"You have gold making a high, and gold at these levels is kind of a red flag. Maybe there's some money going out of equities," said Jim Fehrenbach, head of institutional sales and institutional trading at Piper Jaffray, in Minneapolis.

Some traders said cool heads would be needed when the marker reopens.

"It's like swinging at a bad pitch and missing," said Michael O'Hare of Lehman Brothers in New York. "You have to have the tolerance for the day you're going to incur a lot of red, and you have to be able to take a day that's going to give you a lot of green," he said. "You've got to be disciplined at all times."

Others were more concerned with dulling the pain.

"It's Friday, and I'm heading out of here," said one trader, disclosing his coping strategy. "I drink a lot - vodka - in a row."

- REUTERS