Markets Take a Pounding : IN NEW YORK, TOKYO : Dow Slides; Japan Stocks Hit 6-Year Low
Stocks fell sharply Wednesday as worries about second-quarter corporate earnings and selling linked to Friday’s options expirations sliced 1.25% off the Dow Jones industrial average.
The Dow Jones average of 30 industrials fell 41.73 points to 3,287.76, bringing its net loss over the last seven sessions to 116.37 points.
Meanwhile, the Tokyo stock market plunged to its lowest level in almost six years, and analysts said investors needed to see strong Japanese government action on the economy to lift their despair.
The key 225-share Nikkei average fell 507.73 points, or 2.99%, to 16,445.80, its lowest close since October, 1986, and 58% below its 1989 peak at the height of Japan’s “bubble” economy.
In the daily tally on the New York Stock Exchange, declining issues swamped advances by more than 3 to 1 on Big Board volume of 243.34 million shares, up from Tuesday’s 194.4 million.
“Today’s performance was rather pitiful,” said Dick Stein, a vice president at MKI Securities. “People are somewhat fearful that earnings are not going to be good enough to support stock prices at these levels.”
John Brooks at Davis Mendel & Regenstein said the quarterly expiration of stock index options, individual stock options and index futures on Friday kept many would-be buyers sidelined, and they are likely to remain so until next week.
* Telefonos de Mexico topped the most-active list, dropping 3 1/8 to 45 3/8 on nearly 11 million shares amid profit taking and investors’ worries about the stability of the Latin American markets.
The selloff may have been triggered, in part, by concern that a U.S. Supreme Court decision earlier this week allowing U.S. agents to kidnap suspects abroad could damage trade talks between the United States, Mexico and Canada, analysts said.
The decline helped to depress the already weak market sentiment, they said.
Among the market highlights:
* Auto stocks were hit hard by sellers cashing in on the group’s strong gains this year. General Motors fell 2 3/8 to 41 5/8; Ford Motor 2 1/8 to 45 1/2, and Chrysler 7/8 to 19 7/8.
* Other losers among the blue chips included Coca-Cola, down 1 3/8 at 39 3/8; Merck, down 1 1/2 at 47 1/4; Hewlett-Packard, down 3 1/8 at 65 3/8, and Procter & Gamble, down 2 3/8 at 46 1/2.
* Several of the day’s bigger casualties came on disappointing earnings news. For instance, Philips tumbled 5 to 16 5/8 after the company projected substantially lower earnings for the second quarter, citing poor conditions in the worldwide consumer electronics market.
* Upjohn, which said its second-quarter earnings would not surpass results from the comparable period last year, fell 1 3/4 to 32 1/4.
* AMR dropped 3/4 to 62 5/8. The parent of American Airlines said it is nearly certain to record a loss for the second quarter, citing fare competition and rising fuel prices.
* Among other airlines, Delta Air Lines fell 3/4 to 57 1/4; UAL 3/4 to 115 1/4, and USAir Group 5/8 to 11 1/4.
* Fabri-Centers of America plunged 3 1/8 to 16 1/2 on top of a 3 3/4-point drop Tuesday, when the company said it expected a wider loss in the second quarter than the deficit of 4 cents a share it posted in the corresponding period last year.
The stock of the home furnishings retailer traded earlier this year as high as 47 1/4, and has lost about half its value since last month alone.
* On the plus side, shares of Adobe Systems jumped 3 1/4 to 46 after the company reported better than forecast second-quarter profits. Lehman Bros. repeated a buy rating.
* Agco Corp., which said it expects a second-quarter loss and reduced earnings for the full year, tumbled 4 1/2 to 7 1/4.
* Medical Care International slumped 6 1/2 to 48 1/2, and Critical Care America lost 3 7/8 to 35 3/8. Both companies agreed to merge.
Elsewhere in overseas trading, share prices fell on the London stock exchange. At closing, the broad-based Financial Times 100-share average was down 17.9 points, or 0.68%, at 2,598.4.
In Frankfurt, shares stuck tightly to their opening losses in a dull session marked only by caution ahead of today’s holiday and Friday’s option expirations. The 30-share DAX index traded in a meager range of only about two points, ending 7.32 lower at 1,771.78.
Credit
Treasury bond prices closed slightly higher after an erratic session pegged to favorable economic news.
The price of the Treasury’s main 30-year bond, which gained 7/32 point on Tuesday, rose 5/32 point, or $1.56 per $1,000 in face amount. Its yield slipped to 7.82% from 7.83% late Tuesday.
The federal funds rate, the interest on overnight loans between banks, was quoted at 3.688%, up from 3.625 late Tuesday.
Currency
The dollar settled higher across the board, but trading largely centered on the European currencies.
The dollar closed at 1.575 German marks in New York, up from 1.564 late Tuesday. The dollar settled at 127.25 Japanese yen, up from 126.50.
In New York, the British pound cost $1.857, less expensive than Tuesday’s $1.865.
Commodities
World sugar for July delivery jumped 0.52 of a cent to 11.05 cents a pound as the contract posted its fourth straight daily advance. The contract traded as high 11.14 cents during the session, the highest since last June 28, when near-term sugar reached 11.40 cents a pound.
Precious metal futures fell for a second day as the dollar strengthened. July platinum fell $3 to $361.90 an ounce on the New York Mercantile Exchange. On New York’s Commodity Exchange, June gold dropped $1 to $341.20 an ounce, and July silver slipped 1.3 cents to $4.09 an ounce.
