U.S. Stocks Slide Pre-NAFTA; Asian Stocks React Positively : Market Overview
U.S. stocks closed broadly lower Wednesday, despite widespread expectations that the North American Free Trade Agreement would be approved by the House of Representatives. Analysts said NAFTA’s benefits had largely been discounted by the market.
But early today in Asia, most markets showed positive reactions to word of NAFTA’s passage.
* Bond yields inched up, and oil prices rebounded. Gold followed.
Stocks
Tuesday’s 33-point rally in the Dow industrials was quickly forgotten Wednesday, as profit takers hit the market.
Even though by midday NAFTA supporters clearly had enough votes to pass the trade pact in the House, Wall Street’s excitement level waned, traders said.
The Dow industrials closed down 6.42 points at 3,704.35. The broad market fared much worse: Losers topped winners by 13 to 8 on the Big Board in heavy trading of 320 million shares.
The Nasdaq composite index of mostly smaller stocks fell 9.33 points, or 1.2%, to 762.36. Losers beat winners 15 to 10 on Nasdaq.
Analysts said the broad selling in the market, despite NAFTA’s apparent victory, suggested that investors were looking beyond the treaty’s short-term impact.
Although NAFTA’s approval will help underpin the bullish case for stocks in the ‘90s, the market currently has other things to worry about, experts say--especially stocks’ historically high prices relative to earnings.
Indeed, the selling Wednesday was concentrated in many high-flying growth stocks that had led the market since summer.
Still, some Wall Streeters said the market’s mood today could improve with NAFTA finally out of the way. “This is a real positive for the economy and for markets in the longer term,” said A.C. Moore, investment strategist at SBCM/Argus in Santa Barbara.
In Mexico City on Wednesday, the market’s bullish tone dimmed only slightly. The Bolsa index eased 10.85 points to 2,148.50, after hitting a record high Tuesday.
But in Toronto, the TSE-300 index lost 20.70 points to 4,236.50.
Early today in Asia, traders seemed to react positively to news that the House had approved NAFTA. In Tokyo, the Nikkei-225 stock index was up 99.71 points to 18,208.42 at midday, after losing 137.41 points Wednesday.
In Singapore and Bangkok, stocks recovered from early losses today after word of NAFTA’s approval spread.
Hong Kong shares also appeared to benefit. The Hang Seng index, down 178 points Wednesday after Morgan Stanley & Co. strategists warned that the market was temporarily overheated, sank another 181 points early today. But by late morning, the loss was cut to 97.96 points, at 9,409.02.
Among U.S. market highlights:
* The selloff was led by many smaller growth stocks that had been recent market stars.
In the telecommunications area, Newbridge Networks plummeted 6 5/8 to 58 on a disappointing earnings report. Other telecom issues falling included Qualcomm, down 3 1/2 to 62 1/2; DSC Communications, off 3 to 62; Nextel, down 2 7/8 to 38 5/8, and Dial Page, off 2 1/2 to 53 1/2.
* Among other hot growth issues, Marvel Entertainment plunged 4 1/8 to 29 1/4, PetSmart lost 2 to 31 and Lone Star Steakhouses tumbled 1 3/8 to 25 3/4.
* Technology stocks in general were weak, after Hewlett-Packard’s quarterly earnings fell short of expectations. H-P lost 3 3/4 to 73 3/4.
* On the plus side, energy stocks rallied as oil prices rebounded. Exxon rose 1 to 63 3/4, Chevron soared 3 to 93, Enron surged 1 3/8 to 32 5/8 and Unocal gained 1 1/8 to 28 1/4.
* Some industrial stocks also gained. GM added 1 to 53 3/4, USX-U.S. Steel rose 5/8 to 38, Eaton gained 3/4 to 51 3/4 and Tenneco was up 7/8 to 50 5/8.
Other Markets
An early rally in the Treasury bond market fizzled after an expected Federal Reserve Board purchase of government securities failed to materialize.
Rising oil and gold prices also hurt. Still, the yield on the 30-year T-bond inched up to just 6.17% from Tuesday’s 6.16%.
The Fed had been expected to buy securities for technical reasons related to banking system liquidity. However, no purchases occurred.
Elsewhere:
* A hint that OPEC might reduce crude oil production was enough to overwhelm bearish domestic supply statistics, pushing crude oil futures up 27 cents to $17.04 a barrel on the New York Merc.
* Gold finished at $376.80 an ounce, up $2.70 on the Comex. Silver gained 4.3 cents to $4.60.
Market Roundup, D12
