Exports Pull Trade Deficit Down 15%; Stocks Slump : Dow Off 38; Dollar Drubbed
Record exports pulled the U.S. merchandise trade deficit down nearly 15% to $10.46 billion in September, the government said today, but financial markets rejected the good news, sending stock prices lower and the dollar down sharply.
The deficit figure, although smaller, was toward the high end of market expectations and raised the possibility that the dollar will need to fall farther to make American goods cheaper in world markets.
“The numbers showed improvement; there’s no question about it. But the absolute number’s still pretty high,” said John McCarthy, chief dealer of Amsterdam Rotterdam Bank in New York.
Exports set a record, while imports dropped slightly from their record levels of August, the Commerce Department said.
Stocks, bonds and the dollar all stumbled in response to the trade figures and new indications by Federal Reserve Chairman Alan Greenspan that the central bank will tighten the money supply unless the federal budget deficit is addressed more directly than it has been. (Story, Page 2.)
The Dow Jones average of 30 industrials closed down 38.59 today at 2,038.58, its lowest level in more than two months. New York Stock Exchange volume was about 161.71 million shares compared with 115.17 million Tuesday. (Tables in Business Section.)
In early-afternoon New York trading, the dollar sank to 122.48 against the Japanese yen, down from Tuesday’s closing level of 123.20. At one point the dollar fell to a low 122 yen, well below the lowest level for the year, which was 122.65 yen, set Jan. 4.
Against the West German mark in New York, the dollar plunged to 1.7220 marks, down from 1.7420 on Tuesday. It reached a midday low of 1.72. The British pound in New York jumped to $1.8240, from $1.8085.
Analysts had anticipated the narrowing of the U.S. trade gap in September after a large widening in August in what has been a month-to-month seesaw pattern most of this year.
Many analysts, however, had hoped for a greater narrowing of the gap to prevent a continuing raid on the dollar triggered largely by concerns about President-elect George Bush’s resolve to bring down the trade and budget deficits.
“There is a feeling of desperation in the market,” said Francoise Soares-Kemp, a vice president in the treasury division of Credit Suisse. “We have an incoming President that keeps telling people to ‘Read my lips. We will not raise taxes.’ The market fears there is no commitment to do anything about the budget deficit that is credible.”
Including the September figures, the trade deficit the first nine months of this year is running at an annual rate of $137.2 billion, compared with a record $170.3 billion last year and $155.1 billion in 1986.
