Dow Skids 27.73 as Sellers Brace for Jobs Report : Market Overview
Stocks ended with big losses, as weakness in technology issues and bad news from American Express dragged down the whole market.
The Dow Jones industrial average dropped 27.73 points to 2,984.79, for its largest point loss since it fell 69.99 on Aug. 18.
The dollar fell anew, and in early trading today in Tokyo broke below 130 yen.
Stocks
Investor nervousness ahead of today’s key unemployment report for September helped fuel selling that was at first centered in tech issues, analysts said.
On the New York Stock Exchange, declining stocks led gainers by more than 2 to 1, as volume rose to 174.39 million shares from Wednesday’s 166.38 million.
Analysts said Thursday’s trading was typical of a day before an important economic indicator. Economists expect the unemployment rate to rise to 6.9% in September from 6.8% in August.
“A weak economy and weak earnings are still leaving the market in a churning and vulnerable position,” said Boston Co. economist Allen Sinai.
The sluggish economic situation, while helping drive interest rates lower, has also made investors nervous about corporate earnings. Third-quarter earnings reports are starting to come in, and the previews have been almost uniformly bad--as accentuated by announcements this week by key tech companies and such blue chips as American Express.
AmEx plunged 2 3/8 to 23 and was the most active NYSE issue on news that it will take a $265-million charge, in part to cover heavy charge card losses.
Among other highlights:
* AmEx’s decline hurt the Dow index, as did sharp drops in other economically sensitive firms such as Alcoa, off 1 3/8 to 59 3/8; IBM, off 2 1/8 to 99, and GE, off 1 3/8 to 69 1/8.
* Technology stocks continued to sell off on disappointing earnings. Conner Peripherals, a disk drive maker, dropped 2 1/2 to 16 after it forecast lower third-quarter earnings. Also, chip maker Advanced Micro Devices fell 3/4 to 8 5/8 after saying quarterly results will slow from the second quarter.
Another big tech loser was computer disk-maker Komag, down 4 1/4 to 18 1/2. Conner is Komag’s largest customer.
The weakness in tech stocks helped pull the NASDAQ small-stock index down 5.82 points to 520.51, a 1.1% loss compared to the Dow’s 0.9% drop.
* Biotech stocks, which have been riding a roller coaster lately, turned down again. Amgen sank 2 1/4 to 53 1/2, Immune Response lost 1 1/2 to 34, Biogen gave up 1 3/4 to 33 1/2, and Centocor fell 2 1/2 to 48 3/4. A Montgomery Securities analyst said Centocor’s Centoxin drug to treat deadly infections is not being well received by physicians.
Among other health-care stocks, battered SciMed Life fell 4 1/4 to 47 1/4 after Hambrecht & Quist removed the stock from its selected stock list because of concern about patent infringement suits filed against the company. SciMed has fallen from 87 since last week.
* Financial stocks were mixed. Some S&Ls; continued to lose ground on renewed worries about potential loan losses. H. F. Ahmanson slid 7/8 to 17, and Great Western eased 3/8 to 16 1/8. Also falling was Federal National Mortgage, off 2 to 64 1/8. But mortgage banker Countrywide Credit jumped 1 1/4 to a new 1991 high of 30 3/8.
* Anaheim-based retailer ClothesTime gained 5/8 to a new 1991 high of 10 1/8 on expectations that its sales were strong in September.
Overseas, Tokyo stocks chased the strong yen upward, shrugging off fears of overheating and news that Finance Minister Ryutaro Hashimoto had submitted his resignation. The Nikkei average rose 336.33 points, or 1.4%, to 24,711.44.
British shares fell after a weak opening on Wall Street. In London, the Financial Times 100-share average sank 18.6 points to 2,625.6.
The Frankfurt exchange was closed for Unity Day.
Credit
Yields on long-term Treasury bonds inched up, while yields on shorter-term bonds continued to drop. Traders still expect the Federal Reserve to ease interest rates in the weeks ahead.
The price of the Treasury’s key 30-year bond fell 5/32 point, or $1.56 per $1,000. Its yield rose to 7.84% from 7.82% Wednesday.
If today’s unemployment report shows renewed weakness in the economy, as expected, many traders believe the Fed will react by easing the federal funds rate, the interest on overnight loans between banks, by 0.25% from its current target level, widely believed to be 5.25%.
Optimism about lower rates continues to drive most bond yields lower. Traders said the longer-term Treasury bonds apparently were hit by profit takers on Thursday, but that sentiment remains strong that the Fed must ease credit further.
Yields on three- and six-month Treasury bills, meanwhile, fell amid a rumor that the Fed is considering allowing banks to include T-bill holdings in their reported reserves as a way to ease lending restrictions and the credit crunch. That could increase demand for T-bills. The Fed later denied the rumor.
Currency
The dollar sank to a seven-month low against the Japanese yen in New York, as the yen rose against most currencies worldwide.
In New York, the dollar plunged to 130.60 yen from 132.60 Wednesday. Early today in Tokyo, the dollar plunged to 129.70 yen.
Michael Guarino, trader at ABN-Amro Bank in New York, said the announcement that Japanese Finance Minister Ryutaro Hashimoto had tendered his resignation in the wake of the Japanese financial scandals may have helped the yen. He said the resignation could signal that an embarrassing series of scandals are being “put to rest.”
The dollar also slipped to 1.664 German marks in New York, compared to Wednesday’s 1.666.
Commodities
Light, sweet crude oil for November settled at $22.67 per barrel, up 34 cents, at the New York Merc.
Oil rose as traders responded to reports of shipping problems caused by bad weather in the North Sea, as well as delays in the export-loading of Soviet supplies of gas oil, the European equivalent of home heating oil.
The market was given a further jolt by news of a fire at the Chevron refinery in Philadelphia.
Elsewhere, gold rose on continuing rumors about dwindling gold reserves in the Soviet Union. October gold rose $2.10 to $357.70 an ounce on New York’s Comex; December silver gained 3.5 cents to $4.22.
