Dow Falls 48.02 Amid Renewed Worries of War : Stocks: Broader markets also drop dramatically. The blue chip index ends the week down 84.65, a 3.4% loss.
Investors pounded shares of financial service companies once again and dumped most other stocks Friday as worries mounted about the economy and the threat of war in the Persian Gulf.
The Dow Jones industrial index fell 48.02 points, or 1.9%, to close at 2,436.14, building on Thursday’s 20.05-point slump.
The blue chip index lost 84.65 points for the week, down 3.4%.
The broader market also took a heavy hit Friday, with 1,152 shares losing value on the New York Stock Exchange and only 369 chalking up gains. But Big Board volume was just 130.19 million shares, down from 141.46 million Thursday.
The oil-sensitive Dow Jones transportation index was battered for the second session in a row, falling 14.24 points to 837.09, a 1.8% loss.
Sharp losses in the financial services sector underscored growing gloom about the economy, analysts said.
“There’s concern about continued weakness in the economy and concern that the weakness will show up as additional non-performing assets in bank portfolios,” said Hugh Johnson, chief investment officer at First Albany Co.
“The banking stocks--they’re just being decimated,” one trader said late in the session.
But fear of war was the key trigger. “Tensions in the Mideast have raised a lot of concerns about the probability of war,” said Alan Ackerman of Gruntal & Co.
A Washington official said Secretary of State James A. Baker III is contemplating another Persian Gulf trip amid unconfirmed news reports that he might discuss with Saudi Arabia a date for an assault against Iraq.
“There’s a sniff of war back in the air,” said Allen Sinai, chief economist at Boston Co.
Market highlights:
* Among prominent commercial banking issues, Manufacturers Hanover plunged 3 to 17 after hinting that it, too, might cut its dividend, following the lead of other troubled banks. Elsewhere, Citicorp dropped 1/2 to 11 1/8, Chemical Banking dropped 1 to 11 1/4, BankAmerica fell 1 1/8 to 18 3/4, Security Pacific lost 1 5/8 to 18 5/8 and Wells Fargo slumped 3 5/8 to 47 7/8..
* Mortgage lender Del-Val Financial tumbled 11 3/4 to 2 1/4--a drop of almost 84%. The NYSE said it requested clarification of the firm’s financial condition.
* Among other suffering financial stocks, Merrill Lynch lost 1 3/4 to 17 7/8, American Express fell 1 1/8 to 18 5/8 and Primerica dropped 2 to 19.
* Unisys, the most actively traded issue, fell 1 1/8 to 2 1/4. Prudential-Bache analyst Rick Martin repeated a sell recommendation and said the computer company faced at least two or three more quarters of losses. Other tech stocks also tumbled, including Digital Equipment, off 3 3/8 to 49 5/8, NCR, off 1 1/4 to 48 1/4, and IBM, down 1 1/2 to 106 5/8.
* Pfizer dropped 3 to 74 3/8 after company officials met with Wall Street analysts, some of whom were disappointed about its earnings outlook for the 1990s.
* Food stocks, recent favorites, were hit by profit taking. General Mills fell 3 1/8 to 86 7/8, Kellogg dropped 2 3/8 to 71 1/4 and ConAgra lost 1 3/8 to 33 1/8.
The weaker yen and higher oil prices took their toll on the Tokyo stock market, with profit taking and position-squaring before the weekend also pushing prices lower. The 225-share Nikkei index closed off 346.99 points at 25,005.64.
Share prices ended sharply lower on London’s Stock Exchange as traders became nervous over rising Middle East tensions and a weak start on Wall Street. The Financial Times-Stock Exchange 100-share index was down 25.6 points, or 1.2%, at 2,063.1.
German stock prices dropped 2.7% in nervous trading. The 30-share DAX index ended 40.53 points down at the day’s low of 1,457.05.
CREDIT: Bond Prices Decline on Budget Concerns
Bond prices fell as traders had some last-minute jitters about the federal budget agreement and as tensions appeared to increase in the Middle East.
The price of the Treasury’s bellwether 30-year bond slipped 7/32 point, or about $2.18 per $1,000 in face amount. Its yield edged up to 8.77% from 8.75% late Thursday.
Analysts said the market was worried that the House, which was preparing for a vote on the budget agreement, might not approve the measure.
The credit markets have been waiting anxiously for Congress to pass a budget-cutting bill because the Federal Reserve has made a budget package a prerequisite for lower interest rates.
Analysts said traders also were unsettled by news that more U.S. troops were being sent to Saudi Arabia. In announcing the move on Thursday, Defense Secretary Dick Cheney said the extra troops will give U.S. military authorities more leverage in dealing with Iraq’s huge army.
The federal funds rate, the interest on overnight loans between banks, was 7.813%, down from 8% late Thursday.
CURRENCY: Dollar Closes Mixed in Slow Trading
The dollar ended mixed in extremely quiet trading on world currency markets amid the nervousness over the U.S. military buildup in the Persian Gulf.
Traders said there was spotty dollar buying as some investors sought a safe haven in the U.S. currency ahead of an uncertain weekend in the Middle East. Adding to their concern was the disclosure that the United States plans to send up to 100,000 more troops to the area.
“It appears with the situation in the Persian Gulf very, very tense, people wanted to buy back a few dollars,” said Robert Hatcher, a corporate dealer with Barclays Bank PLC. The dollar typically is considered the currency of choice in times of global turmoil.
But countering the advance was an underlying bearish sentiment toward the U.S. currency based on the expectation of lower interest rates and the weakening economy. The market is anticipating that the Federal Reserve will notch interest rates lower once the deficit-reducing budget package is in place. Lower interest rates make dollar-denominated securities less attractive to investors.
In New York, the dollar settled at 128.25 yen, unchanged from Thursday. The British pound sold at $1.956, more expensive than Thursday’s $1.950. The German mark fell to 1.513 from 1.518.
COMMODITIES: Crude Oil, Gold Prices Decline
Crude oil and refined products for near-term delivery fell sharply on the New York Mercantile Exchange, giving up some of Thursday’s gains.
The selling reflected pre-weekend profit taking and a lack of significant fresh developments in the Persian Gulf, analysts said.
Light sweet crude oil futures settled 32 cents to $1.68 lower, with December at $33.01 a barrel; heating oil was 0.24 cent to 3.42 cents lower, with November at 88.25 cents a gallon, and unleaded gasoline was 2.13 cents lower to 0.22 cent higher, with November at 91.47 cents a gallon.
The drop in oil prices prompted heavy selling of gold, which had rallied along with crude oil on Thursday. On New York’s Commodity Exchange, gold settled $4.90 to $5.40 lower, with October at $370.90 an ounce; silver was 15.4 cents to 17.9 cents lower, with October at $4.05 an ounce.
