Bush’s Victory Taken in Stride; Dow Drops 9.25
A weaker dollar and lower Treasury bond prices Wednesday weighed on stocks, which closed lower the day after the presidential election.
The Dow Jones index of 30 industrials closed down 9.25 at 2,118.24 after an erratic session in which the blue chip indicator opened lower, rallied before midday, then plunged more than 20 points at mid-afternoon.
Declining issues outnumbered advancers by about 2 to 1 in nationwide New York Stock Exchange trading.
Market analysts said investors have already overcome any enthusiasm about the victory of Republican George Bush, the Wall Street favorite, and said stocks were undercut by the fall in the dollar.
“The market is already writing off the election. Now it’s going back to basic worries” such as inflation and the weak dollar, said Ralph Bloch, an analyst with Raymond, James & Associates.
The dollar tumbled to a five-month low against the West German mark Wednesday as the foreign exchange market also looked beyond the Bush victory to the large and unresolved U.S. trade and budget deficits that will confront the new administration.
Bearish Sentiment
“The (stock) selloff was no big surprise,” said Andrew Riley, Yamaichi International portfolio strategist. “We’re still vulnerable on the downside.”
Stocks were also pressured by weaker Treasury bond prices. A slight rebound by Treasuries, which came off their lows, later helped lift equities but could not reverse the bearish sentiment.
The benchmark 30-year Treasury bond fell 16/32 to 101-13/32, raising its yield to 8.99% from 8.94% at Tuesday’s close.
Shares of some stocks involved in takeovers or leveraged buyouts fell on heightened concerns that the U.S. government plans tax legislation that would make leveraged buyouts less attractive, traders said.
They said the market’s fears were sparked by Senate Republican leader Bob Dole, who said tax legislators may examine interest deductions that make leveraged buyouts attractive from a tax standpoint.
West Point-Pepperell, threatened by a takeover bid from Farley Inc., fell 7/8 to 41 1/8, and Pillsbury, facing a $5.23-billion offer from Grand Metropolitan PLC, fell to 58 1/2.
The Dole statement reminded investors of recent remarks by Federal Reserve Chairman Alan Greenspan, who has warned banks to consider how loans used to finance leveraged buyouts would fare during a recession or a time of high inflation.
Chemical Stocks Fall
“Dole’s statement is just something else added on top of Greenspan to make people nervous,” an arbitrager said.
Shares of Georgia Gulf Corp. and several other chemical producers fell amid concern over pricing weakness for polyvinyl chloride and other chemicals used by the plastics industry. Georgia Gulf fell 2 1/2 to 70 5/8, while Vista Chemical was down 1 1/2 to 47.
Holly Farms shares rose 1/8 to 54 3/8. Tyson Foods, which is seeking to acquire Holly for $52 a share, said it has no plans to raise its offer, but investors appear to believe that a competing bid may emerge.
Big Board volume totaled 153.14 million shares, up from 141.66 million in the previous session. Nationwide consolidated volume in NYSE-listed issues, including trading at regional exchanges and on the over-the-counter market, totaled 179.346 million shares.
The NYSE composite index of all its listed common stocks declined 0.92 to 153.92.
Standard & Poor’s industrial index fell 2.14 to 314.61; its 500-stock composite index declined 1.82 to 273.33.
The Wilshire index of 5,000 equities closed at 2,695.240, down 15.103.
The NASDAQ composite index was down 1.10 to 377.74.
The American Stock Exchange market-value index fell 0.72 to 294.04.
Stock prices rose in Tokyo after returns showed Bush winning, a sign to world markets that big policy changes are not in the offing. The Nikkei 225-share index rose 205.51 to 28,212.78.
However, stock prices dropped sharply in London on skepticism over Bush’s ability to handle the U.S. economy and worries over the weakness of the dollar. The Financial Times 100-stock index fell 14.9 to 1,825.7.
