Dow Dives 44 on Renewed Fears of Weak Earnings : Market Overview
Highlights of Tuesday’s market activity, compiled from Times staff and wire reports:
* Stocks prices fell sharply in heavy trading on renewed fears of disappointing corporate earnings. The Dow Jones industrials slumped 44.03 points, or 1.3%, to 3,295.17.
* The dollar plunged across the board in hectic trading, after Treasury Secretary Nicholas F. Brady said the United States isn’t worried about the currency’s slide.
* Silver’s price tumbled after a Saudi investor allegedly dumped a huge supply on the market.
Stocks
Wall Street’s losses were widespread after a new round of earnings “pre-announcements” from key companies thickened the gloom over the economic outlook.
Paper giant Georgia-Pacific plunged 4 3/8 to 55 after it said second-quarter earnings will barely break even.
Elsewhere, Dillard Department Stores dropped 3 5/8 to 32 1/2 after analysts slashed earnings estimates for the company, citing a falloff in June retail sales.
Another blow to market confidence was drug firm Marion Merrell Dow’s stock collapse. It finished down 6 1/8 to 27 3/8 after the FDA ordered the firm to warn about possible life-threatening side effects of its antihistamine Seldane.
The Dow index staged a small rally early, but the rising tide of bad news finally swamped the market late in the day.
On the New York Stock Exchange, declining issues outnumbered advances by about 3 to 2. Volume jumped to 226.05 million shares from 186.92 million Monday.
The Dow’s loss was the biggest since it fell 61.94 points on April 7.
David Bostian, economist at Herzog Heine Geduld, said some of the selloff may have been attributable to disappointment that the G-7 Western economic summit in Munich has not produced concrete steps to put the world economy back on track.
Traders say that unless the market receives some good second-quarter earnings news soon, more investors are likely to lose faith in the economy and bail out of stocks. Among the market highlights:
* Retail stocks following Dillard lower included Dayton Hudson, down 3 3/4 to 60 1/2; Penney, off 1 3/4 to 69 1/2; Tiffany, down 2 1/4 to 29 5/8; Melville, which lost 1 3/8 to 45, and Gap, down 1 3/4 to 32 5/8.
Most retailers will report June sales on Thursday, and analysts are increasingly worried that sales were weak across the board.
* Industrial stocks hurt by Georgia-Pacific’s earnings bomb included International Paper, down 2 1/4 to 65 3/4; Scott Paper, off 1 1/4 to 38 1/4; Stanley Works, which fell 1 1/2 to 38 1/2; Phelps Dodge, down 2 to 46 5/8, and Cummins Engine, which lost 3 3/8 to 60 5/8.
* Tech stocks suffered another major hit, as bad earnings news continued in that sector. Software firm Micrografx plummeted 5 3/4 to 7 3/4 after saying quarterly results will be below expectations.
Elsewhere in the group, Apple slumped 2 to 44 1/4, Adobe Systems lost 1 7/8 to 42 3/4, Novell dropped 2 3/4 to 50 3/4, Autodesk tumbled 3 1/8 to 35, and PictureTel gave up 3 1/8 to 21 5/8.
* Utilities were a bright spot. The Dow utilities index rose 1.19 points to 216.45--highest since mid-January--as investors chased high-dividend utility stocks that look more enticing in a weak economy. American Electric Power added 1/2 to 33 1/8, Con Edison gained 1/2 to 29 3/8, and Pacific Gas & Electric rose 1/4 to 33 1/4.
* Among other gainers, slot-machine maker International Game Technology leaped 1 3/8 to 27 7/8. It said it hopes to win licensing approval in Japan for a gaming machine favored by Japanese. In foreign markets, Tokyo stocks suffered another loss, as the Nikkei index dropped 197.52 points to 16,459.55. Traders said investors were unnerved by talk of loan problems at builder Royal Construction, which has been hurt by Japan’s real estate crash.
London shares continued to seesaw. The Financial Times-100 average rose 24.7 points to 2,493.7. In Frankfurt, the DAX average slipped 4.85 points to 1,767.51.
Mexico City stocks took a broad hit. The Bolsa index tumbled 58.72 points, or 3.5%, to 1,614.19, as investors dumped cement giant Cemex in particular. Cemex announced plans to buy all of Spain’s biggest cement firm, Valenciana, for $1.25 billion. Cemex already owns 25% of Valenciana, but investors expressed concern that the price for the rest is excessive.
Currency
The dollar tumbled across the board and to a 17-month low against the German mark after Treasury Secretary Nicholas F. Brady said the United States isn’t worried about its falling currency.
With U.S. interest rates sliding, traders already have little reason to hold the dollar versus many other currencies. Brady’s comment suggested that the dollar could go much lower, especially given the Germans’ unwillingness to cut their interest rates.
In New York, the dollar plummeted to 1.490 marks from 1.513 Monday, and to 124.05 Japanese yen from 124.30.
Credit
Bond yields slipped further as traders bet the weak U.S. economy leaves plenty of room for lower interest rates.
The price of the Treasury’s 30-year bond rose 3/16 point, or $1.88 per $1,000. Its yield dropped to 7.60% from 7.62% Monday. Long-term yields now are at their lowest levels since January.
The federal funds rate, banks’ loan rate among themselves, fell to 2.75% from 3% Monday--a powerful sign of the limp demand for money in the U.S.
Commodities
Silver futures plunged on New York’s Comex after millions of ounces of silver were dumped on the European market.
Silver futures dropped 21.8 cents an ounce by midday before bargain hunting boosted prices. Silver for September ended down 15.8 cents to $3.90 an ounce.
Some analysts said silver had been dumped by Sheik Khalid bin Mahfouz, a Saudi investor who has been indicted in the BCCI scandal.
Analysts also attributed the selloff to the possibility of a sluggish economic recovery and a decrease in industrial demand.
Gold also fell, with the August futures contract losing 40 cents to $347.10 an ounce.
Elsewhere, light, sweet crude oil futures plunged 49 cents to $21.40 a barrel on the New York Merc on indications that stocks are building because of sluggish demand.
