Dow Tumbles 30.72 on Poor Economic News : Market Overview
Stocks tumbled in active trading as surprisingly bad news on the economy put investors in a bearish mood. Heavy selling of energy stocks added to the gloom.
* The dollar’s rally sputtered on fears that the economy is turning down. Lessening worries about Japan’s political crisis also helped the yen at the dollar’s expense.
* Gold jumped to a two-week high. In the bond market, short-term interest rates moved up.
Stocks
The market was battered by a rush of bad news, some of it conflicting.
On the economic front, the Commerce Department reported a surprising 1.6% drop in durable goods orders in May, meaning that demand for those big-ticket items has fallen for three straight months.
Orders for non-defense capital goods, considered a good barometer of industry’s expansion plans, fell 0.8%, also a surprise.
The government also said that gross domestic product rose at an anemic 0.7% in the first quarter, revised down from 0.9%.
Fearing that a slowing economy will cut corporate profits, sellers dominated market action all day--continuing the slow-moving selloff that has gripped Wall Street since early June.
By the close, the Dow industrials were off 30.72 points to 3,466.81, the lowest level since May 18.
Big Board volume was active at 278 million shares. But losers topped winners by a fairly narrow ratio of 5 to 4.
In another blow to the market, news reports suggested that the Federal Reserve appears increasingly likely to raise short-term interest rates soon. But analysts noted that higher rates are inconsistent with the economic outlook.
Among the market highlights:
* Energy stocks led the market lower on fears that slowing growth will depress oil and gas prices. Also, brokerages Kidder Peabody and Oppenheimer downgraded some of the stocks.
Amoco slid 1 7/8 to 54 3/8, Arco dropped 4 3/4 to 114 5/8, Chevron fell 2 1/8 to 86 1/4, Mobil lost 1 3/4 to 73 1/8 and Halliburton gave up 1 3/8 to 38.
* CBS and Capital Cities/ABC slumped on talk that ad demand is slackening. CBS sank 18 5/8 to 214 and Cap Cities plunged 24 to 503.
* Bank stocks turned lower as short-term interest rates edged up. PNC fell 1 to 30 7/8, NationsBank lost 1 3/8 to 47 7/8, Citicorp dropped 3/4 to 28 1/2 and BankAmerica was down 1 1/4 to 43.
* DuPont fell 2 to 47 1/2 after Paine Webber slashed its earnings estimate for 1993 to $2.80 from $3.40, citing a weaker economy.
Surprisingly, however, many industrial stocks advanced despite the gloomy backdrop. Briggs & Stratton added 3/4 to 64 1/4, Monsanto rose 5/8 to 58 1/4, Harnischfeger gained 1/2 to 20 1/2 and Illinois Tool Works jumped 3/4 to 37 7/8.
* Among the winners, battered gambling stocks rebounded after Indiana’s Senate OKd a riverboat casino bill. Argosy Gaming surged 3 5/8 to 31 1/2, Players International rose 1/2 to 18 1/2, Casino Magic gained 1 1/2 to 25 1/2 and President Riverboats shot up 4 1/4 to 34.
* Gold stocks surged with the metal’s price. Newmont Gold rocketed 2 1/4 to 43 1/2, ASA jumped 1 5/8 to 45 3/8, Hemlo Gold added 3/8 to 9 3/4 and Homestake rose 7/8 to 18 5/8.
In Japan, panic over the political crisis eased. Tokyo’s Nikkei index shed just 45.78 points to 19,492.52. At midday today, the Nikkei was up 201.49 points to 19,694.01.
In Frankfurt, the DAX index added 1.31 points to 1,699.39. London’s FTSE-100 index eased 6.9 points to 2,900.7.
Currency
The dollar, which has shot up as much as 7% against leading currencies in the last month, fell broadly with the new batch of weak economic data.
In New York, the dollar closed at 109.05 Japanese yen and 1.691 German marks, down from Tuesday’s 110.90 yen and 1.699 marks.
Early today in Tokyo, the dollar fell to 108.63 yen.
Signs of a faltering economy weaken a nation’s currency because sluggish growth usually depresses interest rates and stocks,scaring off foreign investors.
Though the economic data was worse than expected, however, many analysts say the U.S. economy still looks better than Europe’s--which could bolster the dollar this summer.
Meanwhile, the renewed strength of the Japanese yen was attributed to easing worries about the expected transition to a new government in Japan.
Other Markets
Gold soared in New York, apparently gaining from the weakness of the dollar and investors’ general fears of economic turmoil. On the Comex, near-term gold futures jumped $5.90 to $374.50 an ounce. Silver rose 13.6 cents to $4.39.
The metals also may have reacted to a rise in short-term interest rates on concerns that the Federal Reserve may tighten credit soon. Rising rates would suggest the Fed is worried about inflation.
In the bond market, the yield on three-month Treasury bills rose to 3.20% from 3.15% on Tuesday.
Long-term yields, however, continued to ease. The 30-year T-bond yield dipped to 6.76% from 6.77% on Tuesday.
On the New York Merc, light, sweet crude oil for August rose 4 cents to $18.86 a barrel.
Market Roundup, D8
