Iraq's invasion of Kuwait shocked an already gloomy stock market Thursday, sending the Dow Jones industrial index skidding 34.66 in the heaviest trading since last October's 190-point mini-crash.
Iraqi President Saddam Hussein "has put the fear of God in everyone," said Andrew Riley, market strategist with Yamaichi International in New York.
Although the Iraqi incursion quickly lifted oil and gold stocks, it clobbered those of the auto companies and others whose fortunes are tied to fuel costs. Also battered were the shares of many of the blue chip growth stocks and other issues that had held up the market until recent sessions.
The New York market's decline, which left the Dow off 1.2% at 2,864.60, mirrored dives in the London and Tokyo markets, which slumped sharply on news of the pre-dawn incursion. Tokyo's Nikkei index of 225 stocks fell 1.9%; the London market's Financial Times stock index of 100 shares lost 1.5% of its value.
Volume on the New York Stock Exchange was 253.09 million shares, compared to 176.81 million shares Wednesday and 416.29 million shares in the plunge last Oct. 13. On the Big Board, losers swamped rising stocks 1,211 to 464.
The invasion raised the kind of general uncertainties that traders so dislike. It was also read as a portent of rising oil prices, which could fuel inflation and keep the Federal Reserve Board from easing interest rates. These worries mingled with recent anxieties about bad corporate earnings and a weakening economy.
"The upshot is, nobody wants any unnecessary exposure in a market like this," said John Luvin, vice president of New Japan Securities in New York. "There's been a weak underlying tone, and now this."
He said traders were also concerned that congressional budget negotiators might scrap consideration of any new energy taxes in the face of the latest rise in oil prices. This suggested that a deal to ease the budget deficit may not be forthcoming, which might in turn work to keep interest rates high.
Traders were also focused on the government's monthly employment figures that are due today and the prospect of a major Treasury bond sale next week, Luvin said. The bond sale, by suggesting demand for government securities, could have wide effects on interest rates.
But by late afternoon, others were hopeful that the market had already come through the worst of the crisis. The Dow had been off as much as 45 points early in the day. Iraq's announcement that it planned to leave Kuwaiti soil "sounds to some people like this is going to be settled quickly," said Ken Ducey, head of institutional trading for S. G. Warburg & Co. in New York. "They've done what they wanted to do."
The Dow's drop would have been far steeper without the upward lift provided by the oil stocks. Texaco, Exxon and Chevron soared, leading energy stocks in general sharply higher. (Story, D4.)
Broader indexes fell like the Dow. The Standard & Poor's 500-stock index was off 4.04 to 351.48, or 1.1%. Small stocks suffered worse, as the NASDAQ over-the-counter composite index tumbled 7.02 to 428.89, or 1.6%.
* Leading the Dow lower were Boeing, off 2 1/4 to 53 1/2; Procter & Gamble, down 3 1/4 to 82 1/4, and Merck, down 2 5/8 to 87 1/4. Many other growth stocks were hard hit, including Disney, down 4 5/8 to 111 3/4, and Circus Circus, down 6 3/4 to 54 1/2.
* GM dropped 1 1/2 to 43 7/8. Ford lost 1 1/4 to 39 7/8, and Chrysler fell 5/8 to 14 3/8, both new 52-week lows.
* High-tech stocks plummeted, giving back more of the gains they racked up in the second quarter. AST Research lost 1 3/8 to 19 3/4, Intel dropped 2 1/4 to 40 1/4 and Compaq fell 1 3/4 to 53.
* Investors continued to hit bank and S&L; stocks mercilessly because of worries about further loan losses in a weak economy. Wells Fargo dropped 2 3/8 to 63 1/2, Manufacturers Hanover lost 1 1/4 to 28 1/4 and Golden West fell 1 3/4 to 27 1/4.
* Among the few non-oil gainers, insurer Twentieth Century Industries rose 1 to 25 on a strong earnings report. Also, some defense stocks rose on speculation that the Iraq-Kuwait crisis will cause Congress to rethink defense budget cuts. Lockheed added 5/8 to 28, McDonnell Douglas gained 1 to 44 and Rockwell rose 3/8 to 27.
* Utilities, which had rallied in recent days as investors sought a safe haven, mostly lost ground. Exceptions were natural gas companies, including Pacific Enterprises, up 1 1/8 to 38 3/4, and Columbia Gas, up 1 1/8 to 48 5/8.