Industrials Fall Amid Worries Over Economy
A steep drop in industrial issues and other economy-sensitive stocks produced another depressing day on Wall Street on Wednesday, despite rallies in the bond market and utility shares.
The Dow industrials, off more than 40 points at midday, closed with a loss of 21.11 points at 3,598.71--just above the 1994 low of 3,593.35 reached April 4.
Much of the Dow’s decline was blamed on a plunge in industrial bellwether Caterpillar, which sank 4 7/8 to 103 1/2 even though the company reported strong quarterly earnings.
Caterpillar was one of many heavy-industry stocks that suffered frenzied selling Wednesday. Traders said investors suddenly decided that this year’s rise in short-term interest rates engineered by the Federal Reserve Board may slow the economy enough to significantly crimp industrial firms’ profits later in the year.
“They finally woke up to the Fed’s tightening” and the implications, said Jon Groveman, president of brokerage Ladenburg Thalmann in New York.
Many technology stocks were also lower, pulling the Nasdaq composite index of mostly smaller stocks down 7.33 points to 705.52. That index now has lost 12.2% from its peak earlier this year.
In the broad market, losers topped winners by 14 to 8 on the New York Stock Exchange and by 18 to 10 on Nasdaq. NYSE trading volume surged to 366.6 million shares. Surprisingly, broader market indexes showed relatively little damage. The blue chip Standard & Poor’s 500 index, for example, eased just 0.58 point to 441.96.
The S&P; was helped as utility stocks and some other interest-rate-sensitive issues rallied for a second day, as bond yields continued to ease. The yield on the Treasury’s 30-year bond slipped to 7.31% from 7.37% on Tuesday.
Also, even as investors sold industrial stocks, they flocked to consumer products stocks and other classic “defensive” issues that tend to hold their value better when the economy weakens.
Among Wednesday’s highlights:
* Industrial issues slumping badly included Clark Equipment, down 5 3/8 to 58; Tenneco, down 2 7/8 to 49 3/4; Deere, off 4 7/8 to 75 5/8; Eaton, off 4 to 50; Chrysler, down 2 1/2 to 46; Ford, off 2 to 54 3/8, and Briggs & Stratton, off 3 3/8 to 81 7/8.
* In the tech arena, Lotus Development tumbled 7 7/8 to 56 3/4 after its quarterly report showed slower-than-expected sales growth. Other tech losers included Cabletron Systems, down 2 3/8 to 95 1/8; IBM, off 1 1/8 to 52 1/4, and Cirrus Logic, off 3 3/8 to 29 3/8.
But earnings reports boosted AT&T; 1 1/2 to 52 1/8, Compaq 3 1/8 to 101 7/8 and DSC Communications 2 1/8 to 55 1/2.
* The Dow utility index surged 4.08 points or 2.1% to 199.64 as battered electric utilities continued to rebound. Baby Bell shares also rose, including Bell Atlantic, up 2 3/8 to 53 5/8; BellSouth, up 2 1/2 to 62, and Ameritech, up 1 3/4 to 41 7/8.
* Among Southland issues, Torrance-based environmental firm International Technology leaped 3/4 to 3 1/8 after a Texas jury awarded it $84 million in a breach-of-contract suit related to Superfund cleanup site.
Tokyo shares slumped, with the Nikkei index losing 310.16 points to 19,882.18. London’s FTSE-100 index fell 29.7 points to 3,098.3, while Frankfurt’s DAX index edged up 10.22 points to 2,182.64.
The dollar slumped against European currencies even though Germany’s central bank allowed another small drop in short-term interest rates.
Elsewhere, May crude oil futures on the New York Merc gained 33 cents to $16.82 per barrel, the highest since November. Gold futures added 70 cents to $372.20.
