CHRISTMAS is more than three weeks off, but the half-price sale is already going on.
It is stocks that are on sale; to wit, the Nasdaq variety. At the low yesterday, the Nasdaq composite was down 51 percent from the giddy highs it reached during trading on March 10, when Internet fever peaked.
In fact, if you're looking for deeply discounted merchandise, that statistic makes the supply seem smaller than it is. Half the Nasdaq stocks in the computer and telecommunications sectors are down more than 75 percent since March 10. Fewer than 5 percent have risen.
Those brutal facts are not news to many investors, and they help to explain why this Christmas will not be nearly as joyful for retailers as might be expected given the low unemployment rate. But the broader question is whether the Nasdaq collapse portends bad economic times.
Most of Wall Street thinks not. The consensus is that the economy is making a soft landing that will leave the annual growth rate around 2.5 percent for a while. The Nasdaq decline is viewed as a correction of overinflated valuations, plus perhaps a little overreaction that has created bargains among the ruins.
At the heart of the optimism is the view that the so-called new economy is alive and well. Consumer purchases of personal computers may be plunging, as Gateway shareholders just learned, but companies are sure to keep investing to reap productivity gains. Those gains in productivity are slashing costs enough to assure that inflation will not be a threat, whatever happens to such old-economy indicators as oil prices. That means the Federal Reserve will be able and willing to bail out the economy by cutting interest rates next year.
The weakest part of that argument is the assumption that business spending on technology will continue at the explosive rate of recent years. Robert Barbera, the chief economist of Hoenig & Company, notes that the durable goods report issued this week shows that orders for electronic and other electrical equipment from July through October were running 6 percent ahead of the 1999 pace. In the first half of the year they were up 24 percent.
A rise of 6 percent is far from horrible, but it is hard to believe that the drop stops here. Most of those computer and telecommunications companies on Nasdaq were buyers of hot new hardware and software. Now many are scrambling to pay their bills, and new orders are out of the question. The Chicago Purchasing Managers survey of new orders -- a barometer of industrial health in the Midwest -- fell yesterday to its lowest level in 18 years.
''This is not a valuation adjustment with no economic repercussions,'' Mr. Barbera said.
The huge surge in capital spending, which is now coming to an end, may turn out to be the signal economic event of the last five years. It raised overall corporate profits because the profits made by the sellers were not offset by expenses of the buyers, who treated the spending as investments. That encouraged investors, and the availability of cheap capital encouraged more capital spending, which pushed up profits further and sparked talk of a new era.
Now that virtuous circle is ending. Profits will suffer as depreciation expenses rise. Consumers will cut back as their investments suffer. Tax receipts will be surprisingly low as capital gains payments fall.
The Fed will try to help by cutting interest rates next year, but the surprise may be how little help that provides.