FINANCIAL MARKETS : Stocks, Dollar Fall on Jitters; Bond Yields Rise
U.S. financial markets weakened Monday in the face of renewed concerns about Mexico’s financial crisis and as investors awaited the Federal Reserve Board’s meeting today.
Weighed down by another plunge in “cyclical” stocks, the Dow industrial average fell 25.91 points to 3,832.08, though it recovered from a loss of 40 points earlier in the day.
In the broad market, losers topped winners by 14 to 8 on the New York Stock Exchange, and smaller stocks suffered a sharp hit. The Nasdaq composite index fell 7.08 points to 751.83.
Analysts said the selling partly reflected fears about a deeper financial crisis in Latin America, if Congress fails to approve a $40-billion financial aid package for Mexico.
The plan’s future is in doubt.
In addition, growing conviction that the U.S. economy is slowing sent some owners of industrial stocks scurrying, while encouraging buying of classic growth stocks.
With the Fed poised to raise short-term interest rates today or Wednesday--to ensure continued moderation in economic growth--investors are bailing out of stocks whose earnings are perceived to be dependent on a strong economy.
Weakness in the dollar also contributed to Wall Street’s setback. In New York, the dollar fell to a three-month low of 1.505 German marks from Friday’s 1.515 marks. The dollar also fell to 98.35 Japanese yen from 99.25.
While higher U.S. interest rates should in theory help the dollar, traders said worries about Mexico dominated the market, and that reflected poorly on the dollar.
In the bond market, meanwhile, yields finished mostly higher, though marginally so. The bellwether 30-year Treasury bond yield closed at 7.76%, up from Friday’s 7.73%.
Yields had plummeted sharply on Friday on new signs of a slower economy.
Among Monday’s highlights:
* Mexican and other Latin American shares were hammered. In Mexico City, the Bolsa index dropped 58.75 points to end the day at 1,898.90, its fourth straight declining session and its lowest closing level since Oct. 8, 1993.
Brazil’s Bovespa stock index dove 5.4%, Argentina’s Merval index sank 6.1% and Chile’s IPSA index lost 2.8%.
* In U.S. trading, Telmex was the most actively traded stock on the NYSE, tumbling 2 to 30 3/4. Among other Mexican issues, construction company Grupo Tribasa fell 7/8 to 9 1/8, and glassmaker Vitro shed 1 1/8 to 9 3/8.
Other U.S.-traded Latin issues falling included Brazil Fund, down 1 5/8 to 27 1/2; Mexico Fund, down 1 3/8 to 17 1/8, and Compania de Telefonos de Chile, down 3 3/4 to 69.
* Investors continued to shift out of stocks in cyclical companies whose earnings are seen as vulnerable to an economic slowdown, and instead bought those less linked to the economic cycle, including household products makers.
Among cyclical stocks, Alcoa lost 3 1/4 to 77 1/2, Dupont fell 1 3/8 to 53 1/8, Inland Steel tumbled 2 1/2 to 27 3/4, International Paper fell 2 3/8 to 70 7/8 and Caterpillar dropped 1 1/8 to 51 5/8.
Consumer stocks gaining at the industrial issues’ expense included Procter & Gamble, up 1 to 65 3/4; Clorox, up 1 to 58 1/2; Gillette, up 1 3/4 to 77 3/4, and Disney, up 7/8 to 51 1/8.
* Technology stocks were mostly lower, following the industrial stocks. Sybase fell 1 1/2 to 43 1/2, Texas Instruments dropped 1 7/8 to 69 3/4, Cabletron Systems sank 2 5/8 to 37 1/2 and Intel lost 1 to 70.
* Louisiana Land & Exploration lost 5 1/8 to 32 3/4 after the company late Friday posted a fourth-quarter loss of $6.64 a share, including a $210.3 million after-tax charge, and slashed its annual dividend.
* Promus Co. climbed 1 5/8 to 32 7/8 after saying it will split its casino and hotel businesses into two independent public corporations.
Other overseas markets were mixed. Tokyo stocks rocketed up 648.53 points, or 3.58%, to 18,752.88.
In London, the Financial Times 100-share average closed at 2,995.9, down 26.3 points. Frankfurt’s 30-share DAX average was up 3.33 points at 2,035.03.
