Day Traders and Financial Markets
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As 1999 came to an end, the U.S. stock market posted another bull run characterized by large capitalization, with technology stocks leading the way. Over the past five years, according to Mike Mosser (1999), the NASDAQ has "led the charge in terms of percentage gain among the indexes, followed by the Standard and Poor's 500 and the Dow with the Russell 2000 lagging behind. Technology stocks are increasing significant in this bull market, and these have been traditionally highly volatile stocks. However, as Mosser (1999) has noted, some industry analysts believe that this sector could suffer from too much supply. Internet stocks benefited from the bull market partly because the demand for them far outweighed the supply. But that problem will be reversed through new initial public offerings (IPOs) and from additional secondary offerings from existing companies. Some industry analysts also point to the role played by "day traders" - stock market players who typically do not go through a broker and make several transactions in a day - in fostering market volatility (Lacy, 1999). Most day traders make relatively small buy and sell orders, but these small amounts of stock add up quickly. NASDAQ is ideal for day traders because it is essentially a computer that connects to dealer terminals, enabling people to buy and sell via a computer. NASDAQ's small order system (SOES) was created to give orders of around 1,000 shares the same
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s reached a high that was followed by the first great Internet sell-off in August. Though Net stocks have now recovered from their lows, some industry analysts are uncertain as to how these stocks will eventually play out. Perhaps market maturity is simply setting in and stock pricing may be beginning to reflect the true prospects of the (literally) hundreds of Net companies that are at work. It is even possible that taking the air out of the Net bubble will make the entire market sustainable.
Business Week (Mandel, 1999) further stated that even companies which have successfully raised capital have been negatively affected by the summer shakeout. In early August, at its low, Amazom.com Inc. was down 60 percent from its 52 week high, E*Trade Group was down 67 percent, MarketWatch.com down 79 percent, TheStreet.com 72 percent, and Yahoo! 50 percent. E-loan's initial public offering was priced at 14, went off at 20.5 on June 23, and shot up to 63 on July 6 only to fall to below its first-day price by early August. It has since rebounded to 40 and most of the other Net stocks are off the bottom as well. For Net companies that had hoped to use high-price stock to buy other companies and rapidly expand market share, the gyrati
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Approximate Word count = 3622
Approximate Pages = 14 (250 words per page)
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