Subprime Fears Trigger Another Stock Market Sell-Off BY JONAH KERI INVESTOR'S BUSINESS DAILY Posted 8/3/2007 A fresh round of credit market fears whacked stocks Friday, sending the major indexes down sharply in broad selling. Stocks started lower, dragged down partly by news that Standard & Poor's cut Bear Stearns' long-term credit outlook following the investment bank's hedge fund problems. Then, in a conference call with analysts around 2 p.m. EDT, Bear Stearns CFO Sam Molinaro called the troubles in the credit market the worst he'd seen in 22 years. The market turned sharply lower after headlines from that call came out. By day's end, the major indexes closed at the bottom of the day's trading ranges, with heavy losses. The Nasdaq dived 2.5%, the Dow industrials 2.1%. The S&P 500 plunged 2.7%, the NYSE composite 2.6%, as both those indexes sliced through their 200-day moving averages. Volume swelled across the board, adding another round of distribution to a market beset by selling lately. Stocks suffered a third straight week of losses. The Nasdaq tumbled 2%, while the S&P 500 lost 1.8%. The Dow slipped just 0.6% as big investors looked for shelter in the biggest blue chips. Friday's action confirmed what has been evident for more than a week: The market is in a correction. The broad indexes tried to rally for a couple days. But Friday's sell-off wiped out that short-lived rally try, as the main indexes undercut their recent lows. The Dow didn't quite fall below its low. But a massive decline in big volume often has the same effect of nixing a rally attempt. As noted in Friday's Big Picture, when a market correction lasts long enough, it can eventually take a bite out of every leading stock. Over the past two weeks, more and more top-rated stocks have fallen in sharp volume. One of Friday's biggest victims was Universal Electronics. (UEIC) After Thursday's close, the maker of universal remote controls reported quarterly earnings that missed views by a penny. The news sent the stock plunging 10% in gigantic volume. Credit card issuer MasterCard (MA) also swooned, dropping 8% in brisk trade. A highly liquid leader that bagged big price gains earlier this year, MasterCard has plunged lately, slicing through its 50-day moving average Wednesday and continuing lower. It's now 25% off its July 13 high. Universal was a mainstay on the IBD 100, while MasterCard was a favorite of big-money mutual funds. But even highly rated stocks have had a tough time holding up under the market's increasing pressure. The safest place to be during a market correction is in cash and out of stocks. If you want to hold, make sure you're only doing so with the highest-quality stocks. Even then, if a winner flashes sell signals, it might make sense to take profits off the table, rather than watch your gains wither away.