Worries About Tokyo Market, U.S. Recovery Send the Dow Down 32.20 : Market Overview
Highlights of Wednesday’s market activity, compiled from Times staff and wire reports:
* Stocks fell sharply for a second straight session, with the Dow average losing 32.20 points as investors grew increasingly jittery about heavy losses among Japanese stocks and prospects for the U.S. economy. The Dow closed at 3,181.35, its lowest since Jan. 2.
* Government bond prices fell moderately, weighed down by lukewarm demand at the Treasury’s auction of seven-year notes.
Stocks
Market participants remained concerned about a 7% decline in the Tokyo stock market over two days, which could lead Japanese investors to sell U.S. stocks to cover losses at home.
Traders also said the drop signaled that some investors are pulling their money out of the market after migrating there earlier this year because of low interest rates.
Just as they did Tuesday, declining issues overwhelmed advancing ones by more than 3 to 1 on the New York Stock Exchange. Volume on the Big Board was a hefty 249.28 million shares, compared to 205.10 million the day before.
The Dow fell nearly 62 points Tuesday.
“The feeling is the market is in the middle of a correction,” said Tom Gallagher, chief stock trader at Oppenheimer & Co.
“Japan is a very large part of the equation,” said Jack Conlon, managing director at Rothschild Inc. “The market for the last few months has been incredibly susceptible to any bad piece of news due to the lofty valuation of stocks.”
“There is a psychological change that has taken place,” said Ron Doran, director of institutional trading at C. L. King & Associates. “People are gun-shy. They are moving to the sidelines as much as they can.”
Rising oil prices over the past few days have triggered inflation fears, which were magnified Wednesday by nervousness ahead of government price reports due this week. The Labor Department is scheduled to report on March producer prices this morning and consumer prices Friday.
* Mobil added 1/8 to 62 1/4, and Exxon edged up 5/8 to 57 1/4, but Chevron fell 3/8 to 64 7/8.
Investors are concerned about the psychological impact a Japanese crisis would have on Wall Street, but analysts said there is greater fear that liquidity problems in Tokyo could prompt Japanese investors to sell Treasury securities.
Analysts noted the possibility of a U.S. interest rate cut as one of the few positive factors in the short term.
Among the market highlights:
* American Telephone & Telegraph lost 1 1/8 to 40 7/8. An arbitrator ruled that AT&T; violated a union contract by laying off 1,500 technicians and may have to pay back-wages to several hundred of them.
* IBM added 2 1/2 to 84 7/8. Merrill Lynch & Co. upgraded its intermediate-term rating on the company to above average from neutral, traders said.
* Teledyne sank 4 5/8 to 22 3/4 after the defense contractor reported weaker-than-expected earnings.
* Health Care Property Investors rose 1 7/8 to 41 1/8. Merrill Lynch raised its long-term rating on the company.
* On the over-the-counter market, SciMed fell 8 1/4 to 58 3/4 after reporting disappointing earnings.
The NASDAQ over-the-counter index fell 7.93 points to 573.68.
In overseas trading, the slumping Tokyo and New York stock markets pushed share prices lower in London and Frankfurt. London’s Financial Times 100-share average, down 30 points in the morning session, finished 11.0 points lower at 2,393.2. In Frankfurt, the 30-share DAX average dropped 19.41 points, or 1.12%, to 1,720.01.
Stocks also slumped in Paris, Hong Kong, Mexico City and Zurich.
Credit
The Treasury’s benchmark 30-year bond fell 5/16 point, or $3.13 per $1,000 in face amount. Its yield, which moves in an opposite direction from price, rose to 7.91% from 7.89% Tuesday.
The tumbling stock prices initially drove up Treasuries as investors pulled money out of shares and into short-term securities, which are considered a safe-haven investment, said Scott Winningham, chief market analyst at Stone & McCarthy Research Associates Inc.
But investors sold bonds after the Treasury’s early afternoon announcement of auction results, which showed weak demand. Longer-term bonds took the biggest hit.
The Treasury sold $9.75 billion in securities at an average yield of 7.11%, up from 6.40% at the last auction Jan. 8. It was the highest rate since seven-year notes averaged 7.20% Oct. 9.
Also hurting bonds were diminished expectations that the Federal Reserve might cut short-term interest rates to stimulate the economy. Hopes of further interest rate reductions had spurred bond buying Tuesday.
Falling interest rates generally boost the value of fixed-income securities such as bonds and notes.
The federal funds rate, the interest on overnight loans between banks, was 3.75%, down from 3.813% Tuesday.
Currency
The dollar rose against major currencies besides the Japanese yen in busy trading after a late technical rally made up a loss earlier in the session.
Most of the action in the foreign exchange markets focused on the relationship between the dollar and the yen. Rumors that the Japanese were aggressively selling dollars for yen dominated dealings much of the day.
The dollar closed in New York at 132.65 yen, down from 133.10 Tuesday.
Stephen Flanagan, a vice president and currency dealer at Mitsubishi Bank, said reports of Japanese dollar sales encouraged others to sell the greenback.
The dollar was also undermined by Wall Street’s weak performance and nagging worries about the economic outlook.
In New York, the dollar ended at 1.628 German marks, up from 1.622 Tuesday.
Commodities
Platinum futures prices sank to a 2 1/2-month low Wednesday as speculators viewed plunging Japanese stock prices as a sign of sagging demand for the metal.
Platinum investment and jewelry demand is centered in Japan, where the metal has the same cachet as gold in the United States.
On other commodity markets, gold and silver prices were little changed; copper futures fell; livestock and meat futures were mixed; oil futures rose, and grains and soybeans were mixed.
Platinum for April delivery fell $7.10 to $342.10 an ounce on the New York Mercantile Exchange. It was the lowest daily settlement for near-term platinum deliveries since Jan. 17.
Gold for April delivery fell 80 cents to $337.90 an ounce on the Commodity Exchange, and May silver rose 0.5 cent to $4.088 an ounce.
Meanwhile, crude oil made a new high for the year on the New York Mercantile Exchange. Light, sweet crude rose 39 cents to $20.62 a barrel.
Market Roundup, D8
