Dow Falls 43 Points as Losing Streak Goes Into 4th Day
Mounting anxiety over the Mideast and the economy sent stock prices down for a fourth straight day Monday as the Dow Jones industrial average tumbled 43.32 points, or 1.7%, to 2,522.77.
Interest rates rose sharply, meanwhile, as oil prices jumped $2.75 a barrel. Gold shot up $9 an ounce, and the dollar surged against foreign currencies.
With the stock market’s latest losses, analysts say, it is clear that Wall Street has found itself stuck in a vacuum created by the Jan. 15 deadline for Iraq to exit Kuwait. Buyers see no reason to jump into the market before the deadline, so the path of least resistance for stock prices is down.
“It’ll be tough going all the way up to the 15th,” said Robert O’Toole, over-the-counter stock trading chief at Shearson Lehman in New York.
The Dow average has fallen 110.89, or 4.2%, since its 1990 close of 2,633.66. Although trading volume has been low--only 131 million shares changed hands on the New York Stock Exchange on Monday--traders say there are no signals to suggest that prices are bottoming.
“We’ve seen only very anemic rally attempts,” said Ed Laux, trader at Kidder, Peabody & Co. in New York.
“I didn’t like the way it closed (Monday),” O’Toole said. “There was no bounce at all at the end.” Indeed, the market’s losses accelerated throughout the day. The Dow was off 17 points at noon EST, 30 points at 2 p.m. and 35 points at 3 p.m.
On the Big Board, declining issues outnumbered advances by about 7 to 2, with 1,219 stocks falling and only 362 rising.
Pessimism about the Mideast rose Monday after the United States and Iraq fanned the war rhetoric. Iraqi President Saddam Hussein warned of a war that would engulf the entire world. U.S. Secretary of State James A. Baker III ruled out an extension of the Jan. 15 deadline.
The tough talk sent the February contract for crude oil rocketing to $27.65 a barrel on the New York Mercantile Exchange.
That, in turn, sent interest rates soaring, as bond investors once again began to focus on the prospects for a Mideast war that would send oil prices--and thus inflation--much higher. The yield on the Treasury’s 30-year bond leaped to 8.30% from 8.20% Friday, with bond prices recording their worst losses in three months.
But even without new jitters in the bond and oil markets, analysts say, stock prices would in all likelihood be heading lower in the short term. Worries are growing about how badly corporate profits will be hit as the economic recession continues to deepen.
Monday, news reports that General Motors could lose as much as $1.4 billion in the fourth quarter shocked many investors, traders said. GM stock tumbled 1 1/8 to 31 7/8, a 52-week low.
But David Holt, technical analyst at Wedbush Morgan Securities in Los Angeles, noted that trading volume in GM was relatively tame at 1.2 million shares. That indicates that the sellers were mostly individual investors, rather than institutions, Holt said.
Indeed, many traders say individual investors have dominated the selling that has driven the market to four straight losses since the new year began. Some analysts are encouraged by that, because it suggests that institutional investors--who hold the greatest power to move the market--already have sold all they care to sell.
If so, and if the Mideast crisis can be resolved quickly, the institutions could be in a strong position to fuel a new rally--albeit only a short one, perhaps, if the recession’s severity has been grossly underestimated.
“There is a lot of cash on the sidelines that will eventually be committed either to fixed-income investments or to equities,” said Holt. But for now, he said, “institutions see no reason to move before Jan. 15.”
Among the market highlights:
* Food and drug stocks were again some of the market’s biggest casualties, as investors took whatever profits they might have made in the stocks in 1990. Among food stocks, CPC International plunged 3 7/8 to 74 1/4, Smucker lost 3 to 41 5/8 and Ralston Purina fell 1 3/8 to 93 5/8. Among drug issues, Merck tumbled 2 1/4 to 83, Johnson & Johnson lost 2 1/8 to 66 5/8 and Amgen gave up 2 1/4 to 57 3/4.
* Industrial stocks that were sharply lower included Ford, down 1 to 25 1/2, Phelps Dodge, off 1 1/8 to 53 3/8, and Monsanto, off 1 1/8 to 46.
* Student Loan Marketing tumbled 2 3/8 to 45 3/4 on a newspaper report that the Bush Administration is considering major changes in the student-loan program.
Among other financial stocks, banks were broadly lower on news of the failure of Bank of New England. Manufacturers Hanover lost 1 1/8 to 20 1/8, Security Pacific dropped 3/4 to 19 3/8 and Wells Fargo fell 1 3/4 to 54.
* In the tech area, Lotus slumped 2 to 16 1/4 after announcing a new rebate program to help defend the firm’s software market share against Microsoft’s advances. Voicemail equipment firm Digital Sound fell 3/32 to 1 1/2 after the firm announced a 25% cut in its work force.
* Oil stocks were one of the market’s few bright spots. Chevron inched up 3/8 to 71 3/8 after projecting strong fourth-quarter earnings. Arco added 5/8 to 121 5/8 and Oryx rose 1 to 34 7/8.
London stocks closed lower, pressured by Mideast worries. The Financial Times 100 stock index fell 12.8 to 2,113.3.
German stocks had a terrible day after Iraq stepped up the war rhetoric. In Frankfurt, the DAX index tumbled 37.91, or 2.7%, to 1,358.16.
In Tokyo, the Nikkei index lost 332.61 to 23,736.57, on Mideast concerns and on worries about the softening yen.
CREDIT Bond Prices’ Drop Biggest in 3 Months Treasury bonds--ever sensitive to the threat of inflation--posted their biggest loss in three months Monday, unnerved by war jitters that sent oil prices soaring.
The Treasury’s bellwether 30-year bond fell 1 3/16 point, or $11.88 per $1,000 in face amount, at closing Monday. Its yield was 8.30%, up from 8.20% late Friday.
The federal funds rate, the interest on overnight loans between banks, closed at 2%, down from 5% late Friday.
CURRENCY Dollar Closes With a Moderate Advance The dollar advanced sharply then eased to more moderate gains as volatility in the Middle East and Soviet Union reinvigorated the its appeal as a safe-haven investment.
With only one week left before the Jan. 15 United Nations deadline for Iraq’s withdrawal from Kuwait, traders bought dollars as a hedge against what they viewed as growing prospects for war.
The dollar settled at 1.5355 German marks in New York, up from late Friday’s 1.5050 marks.
In Tokyo, the dollar rose to a closing 136.05 yen from 133.32 yen at Friday’s close. Later in London, it rose to 136.60 yen. In New York, the dollar settled at 136.10 yen, up from Friday’s 134.85 yen.
In London, the British pound fell to $1.9060 from $1.9340 late Friday. In New York, it cost $1.9031 to buy one pound, less expensive than Friday’s $1.9350.
Other late dollar rates in New York, compared to late Friday’s rates, included: 1.2925 Swiss francs, up from 1.2740; 5.2065 French francs, up from 5.1070; 1,153.50 Italian lire, up from 1,132.00, and 1.1537 Canadian dollars, up from 1.1513.
COMMODITIES Precious Metals Futures Head Up Prices of precious metals futures--led by gold--were sharply higher on New York’s Commodity Exchange as concerns over a possible Persian Gulf war increased.
On other markets, energy futures gained; livestock futures were lower and pork higher, and grain and soybean futures increased.
Gold settled $9 to $9.80 higher, with the contract for delivery in February at $396.20 an ounce; silver was 13.3 to 15.5 cents higher, with March at $4.34.
Market Roundup, D10
