STOCKS : Dow Tumbles 17.58 as War Concerns Grow
Stocks fell broadly as investors braced for war, but dwindling volume showed most investors already are on the sidelines.
The market, eager for any good news, rebounded sharply when news hit at 12:20 PST, quoting Cable News Network as saying Iraq would be willing to consider withdrawing from Kuwait.
The Dow Jones industrial average, which had been down as much as 54 points, recovered about 30 points in the first few minutes after the CNN report hit the news ticker. The Dow’s loss was eventually cut to about 8 points, but the rally quickly faded. The index closed off 17.58 points at 2,483.91.
The report was attributed to an unidentified Iraqi official who was quoted as saying his country wanted to withdraw, but not under the pressure of today’s deadline set by the United Nations Security Council.
The State Department declined to comment on the CNN report.
Overall on the New York Stock Exchange, losing issues outnumbered advancing ones by a wide margin in nationwide trading, with 362 up, 1,211 down and 428 unchanged.
Big Board volume was a relatively light 120.83 million shares, down from Friday’s 123.05 million.
“The market’s very nervous,” said Edward Shopkorn, general partner in Mabon Nugent’s institutional equities. “We are slaves to all this news and all this rhetoric.”
“Clearly, the market doesn’t believe anything until it sees some substance,” said Marshall Acuff, portfolio strategist at Smith Barney, Harris Upham & Co. “You can’t really bring buyers into a market like this.”
War fears were stoked by the failure of weekend talks between U.N. Secretary-General Javier Perez de Cuellar and Iraqi President Saddam Hussein to find a peaceful resolution to the crisis.
A military crackdown by Soviet troops in Lithuania added to Wall Street’s unease. “It introduces more international instability,” said Nomura Securities vice president Peter Davies.
But analysts noted that, while stocks continue to fall, the low volume shows the sellers are only at the margin now. Most big investors are believed to be comfortable holding the stocks they have into any war, because they assume a conflict would be short.
Among the market highlights:
* Small stocks continued to be hammered hard, apparently because many individual investors still are bailing out in advance of the expected Mideast war. The NASDAQ over-the-counter composite index plunged 6.05 points to 355.75, off 1.7%, versus an 0.9% loss for the big-stock S&P; 500 index.
A NASDAQ index of Southland OTC stocks was one of the worst-performing indexes, down 2%. Among the smaller area stocks knocked for big losses were tape-drive makers Rexon, off 3/4 to 4 7/8, and Archive, off 1/2 to 6 1/4; plastics firm Cimco, down 3/4 to 8 1/2, and apparel retailer Wet Seal, down 1/2 to 6 3/4.
* Carson-based lamp maker Dynasty Classics lost 1 to 2 1/2. The firm announced late last week that it would post a fourth-quarter loss because of slowing sales.
* Investors continued to take profits in many growth-stock stars of 1990, including Warner Lambert, down 1 5/8 to 62 5/8, Gillette, down 1 to 58, and CPC International, off 2 to 73 1/2.
* Some steel and other metal stocks rallied, despite the economic gloom. Nucor added 1 1/4 to 59 1/4 and Phelps Dodge rose 3/4 to 54. But auto stocks sank again. GM lost 3/4 to 31 and Ford slipped 1/4 to 25 1/4.
* Oil stocks were among the few bright spots, as oil prices jumped again. Chevron gained 1 to 71 3/8, Arco added 1 1/8 to 119 7/8 and Phillips rose 3/4 to 25 1/4.
Occidental Petroleum rose 1/4 to 17 5/8 and was the most-active Big Board issue. The company said it is taking a $2-billion charge against fourth-quarter earnings to pay for a restructuring.
* Southland S&Ls; weakened significantly. Downey fell 3/4 to 12 1/4, Citadel Holding lost 5/8 to 17 7/8 and HomeFed dropped 3/8 to 4, a new 52-week low.
* Western Digital inched up 1/8 to 4 1/4. It received an OK to begin trading on the NYSE. The move is expected within four weeks.
* Genetics Institute fell 1 3/4 to 37 3/4 after the Food and Drug Administration denied a request to let the company market a kidney failure drug, Marogen, in the United States. Meanwhile, Amgen lost 1/2 to 59 3/4. It is in a patent dispute with Genetics Institute over Marogen, and the FDA denial increases the importance of a court decision expected soon in the case.
In overseas trading, London stocks fell sharply as the market prepared for war. The Financial Times-Stock 100-share index dropped 25.3 points to 2,080.8.
German stocks plunged 3.9% in sometimes hectic trading, as a combination of the Soviet crackdown in Lithuania and fears of the imminent war in the Mideast prompted investors to pull out. The 30-share DAX index tumbled 54.46 points to 1,327.80.
In Tokyo, stocks closed slightly lower in extremely slow trading, as the market froze awaiting new Mideast developments. The Nikkei 225-share average finished at 23,213.23, down just 27.79 points.
CREDIT: Bonds Steady as Gulf Deadline Nears Bond prices closed barely changed in light trading driven by the Persian Gulf crisis deadline.
The Treasury’s bellwether 30-year bond fell 1/16 point, or 63 cents per $1,000 in face amount. The yield was 8.37%, up from 8.36% late Friday.
Bear, Stearns & Co. economist Lawrence Kudlow said the day’s trading was “driven by war fears. . . . It has absolutely no meaning whatsoever.”
Trading was slow throughout the day but picked up in the afternoon after the Cable News Network report. The yield on the long bond traded as high as 8.44%.
The federal funds rate, the interest on overnight loans between banks, rose to 6.75%, up from 6.675% late Friday.
CURRENCY: Dollar Rises in Thin Volatile Trading The dollar was pushed erratically higher by traders focused almost exclusively on the stream of Persian Gulf developments leading up to today’s war deadline.
Trading was described as thin and extremely volatile, dominated by speculation and interbank transactions.
“It was really hanging onto every headline that appeared on the screen,” said Robert Hatcher, corporate dealer for Barclays Bank PLC. “Nobody has any real views--it’s just a question of read the news and go with it.”
The dollar closed at 1.545 German marks, up from 1.529 Friday, and at 135.19 Japanese yen, up from 134.05 Friday.
COMMODITIES: Failed Peace Plan Sends Gold Up $8 Precious metal prices surged on fears that war in the Persian Gulf is becoming inevitable as the deadline for Iraq’s withdrawal from Kuwait approaches.
The February gold contract jumped $8.30 to $401.60 on New York’s Commodity Exchange in reaction to the failure by U.N. chief Perez De Cuellar to secure a peaceful solution to the crisis.
February silver leaped 8.2 cents to $4.23 an ounce.
Once gold futures reached their highs, prices fluctuated in a narrow range, responding to the strength in the crude oil market, said Bette Raptopoulos, an analyst with Prudential-Bache Securities.
Crude oil for February delivery closed up $3.49 at $30.78 a barrel, after having traded as high as $32 a barrel.
Market Roundup, D10
