STOCKS : Dow Takes Deepest Dip in Two Months--37.13
Stocks posted their steepest losses in nearly two months Thursday as worries over the Persian Gulf and the weak economy overshadowed falling interest rates and oil prices.
The Dow Jones industrial average slid 37.13 points, or 1.4%, to end at 2,573.51. It was the biggest loss in the 30-share index since Nov. 7, when it slid 44 points.
In the broader market, 941 stocks fell and 583 rose on moderate New York Stock Exchange volume of 141.4 million shares, up from 126.3 million Wednesday.
The Standard & Poor’s 500 index gave up 1.4%, and the NASDAQ over-the-counter index lost 1.3%.
The prospect of war in the Persian Gulf is driving many investors away from stocks, analysts said. Alice Sadlo, a vice president at McDonald & Co., said, “We have this Jan. 15 deadline staring us in the face. Until we get something concrete, nobody’s going to jump the gun.”
But perhaps more important, investors’ mood increasingly seems to be that the developing recession will hit stock prices far worse than recently suspected--and that lower interest rates won’t help in the near-term.
Investors’ desire to take profits and exit the market was most evident Thursday in selloffs of the leading stocks of 1990--so-called safe haven stocks in the food, drug and consumer products industries. “People feel that, in a deep recession, nothing will be immune,” said one trader. (Related story, D1.)
Among the market highlights:
* Consumer stocks that were hard-hit included Gillette, off 2 1/4 to 58, Schering-Plough, down 1 5/8 to 41 5/8, and Philip Morris, down 1 3/8 to 50 3/4. Merrill Lynch advised clients to shed some of their drug and related medical stocks, in particular, arguing that they had become overextended.
* Major industrial stocks also fell, showing that many investors still believe it is too early to buy those shares, even though the conventional wisdom says industrial issues will begin to rise well before the recession ends. Dow Chemical fell 1 3/8 to 45 5/8, TRW lost 3/4 to 35 1/2 and GE dropped 1 1/4 to 55 1/4.
* Financial stocks fell again. CalFed dropped 1/2 to 3 3/8 on word of rising loan losses. Coast Savings fell 1/4 to 2 1/2, Security Pacific lost 5/8 to 19 3/4 and Imperial Bancorp dropped 3/4 to 11 3/4.
* Hilton jumped 2 1/8 to 38 1/2, as vague takeover rumors resurfaced. The company said it knows of no reason for the activity.
* Santa Ana-based Tokos Medical, which makes pregnancy-monitoring systems for high-risk women, rose 1 to 13 1/2. A key competitor, Healthdyne, plunged 2 7/8 to 7 3/4 after the Food and Drug Administration again refused to OK the firm’s monitoring system.
* A few technology stocks bucked the market downturn. Digital Equipment rose 1 3/8 to 56 1/4, Compaq leaped 1 3/8 to 57 5/8, and Advanced Logic rose 1/2 to 10 1/4. Investors have recently been searching for bargains in the group.
* Oracle Systems lost 1 to 7. Prudential-Bache Securities cut its 1991 and 1992 estimates after the software company reported weak second-quarter earnings.
In London, share prices rose above the day’s lows in late business but market participants kept stocks marked down because of the Persian Gulf crisis and concern about the British economy. The Financial Times-Stock Exchange 100-share index closed 10.5 points lower at 2,117.8.
In Frankfurt, German shares were higher in thin trading. The 30-share DAX index ended 0.55 points higher at 1,366.65.
In Tokyo, the market was closed for an extended holiday. As trading resumed today, the Nikkei index rose 220.47 points to 24,069.18 by midday.
CREDIT Prospects for Peace Send Bond Prices Up Government bond prices rose again as bond investors saw a potential peaceful end to the Iraqi standoff--quite apart from the view of stock investors.
The Treasury’s bellwether 30-year bond rose 13/32 point, or $4.06 per $1,000 in face amount. Its yield, which falls when prices rise, dropped to 8.10% from 8.14% late Wednesday.
The positive tone for the bond market was set before trading started when the White House announced that Secretary of State James A. Baker III may meet with Iraqi Foreign Minister Tariq Aziz next week in a “last attempt” to solve the Persian Gulf crisis.
Later, the government reported a jump in claims for state unemployment insurance for the week ended Dec. 22. Today, the Labor Department is to report on December’s unemployment rate.
The unemployment claims report “seemed to indicate that the labor force continued to deteriorate in a sharp way as 1990 came to a close,” said William V. Sullivan, analyst at Dean Witter Reynolds. That suggests a deepening recession, and more likelihood that interest rates will fall further.
The federal funds rate, the overnight loan rate among banks and a key indicator of the Fed’s activities, fell to 7% in late trading from 11% late Wednesday. The rate often exhibits sharp swings on Wednesdays, which are settlement dates on which banks must report their reserves to authorities.
CURRENCY Dollar Slides a Bit; Traders Reluctant The dollar turned in a mixed performance in narrow trading as traders, focused on Persian Gulf tensions, held their ground against signs of economic weakness.
“It would appear that the market is trying to probe a downside for the dollar but is a bit reluctant because of uncertainty in the Middle East,” said Robert Hatcher, a dealer for Barclays Bank PLC.
The dollar fell to a closing 133.00 Japanese yen in New York from Wednesday’s 134.30. But against the German mark the dollar rose to 1.493 from 1.487.
COMMODITIES Gold Falls Sharply; Silver Prices Soar Gold futures prices fell sharply and silver futures soared on New York’s Commodity Exchange in a mixed reaction to new hopes for peace in the Middle East.
On other commodity markets, orange juice was mostly lower; livestock and meat futures were mostly higher; and grains and soybeans were mixed.
Gold futures settled $2.30 to $2.60 lower, with the February contract at $388.90 an ounce; silver was 10 cents to 10.6 cents higher, with January at $4.21.
Market analysts said the split reflected the mix of economic repercussions that could result if the United States and Iraq reach a peaceful settlement of their standoff over Iraq’s invasion of Kuwait.
Investors tend to buy gold as a hedge against inflation. At the same time, silver, widely used in the photographic and electronics industries, grows more attractive if buyers assume the economy will again expand.
Prices of platinum, another precious metal with a large industrial component, also rallied Thursday. The contract for January delivery rose $2.20 to $411.40 on the New York Mercantile Exchange.
Most orange juice futures plunged on the New York Cotton Exchange, extending Wednesday’s losses in reaction to the lack of frost damage to the Florida juice orange crop over the holidays.
Frozen concentrated orange juice settled 3.85 cents lower to 0.80 cent higher with January at $1.0616 a pound.
Most livestock and meat futures rallied on the Chicago Mercantile Exchange, erasing most of Wednesday’s losses, as traders evened up their positions.
Market Roundup, D6
