Wild Day Sees Stocks Plunge, Then Recover
The U.S. stock market went on another harrowing ride Thursday, falling at one point to its lowest level since early-February before rebounding in late trading to close mixed.
Some analysts say the long-awaited 10%-or-greater “correction” in the broad market may well be in full swing, with more declines to come, as fears rise over higher commodity prices, a stronger dollar and surging interest rates.
After falling 203.76 points over the prior four sessions, the Dow Jones industrial average plunged in early trading, after the government reported higher-than-expected wholesale inflation of 0.5% in March.
Stocks followed the lead of the bond market, where yields jumped in the wake of the inflation news. The 30-year Treasury bond yield rose to an eight-month high of 6.97% in early trading from 6.94% on Wednesday.
But bond yields soon turned lower again, then seesawed the rest of the day. The T-bond yield ended at 6.93%.
Stocks, in turn, stabilized around noon, then fell further in afternoon trading, before staging a dramatic recovery in the final hour.
The Dow, off more than 70 points at its low, ended with a 1.09-point gain, at 5,487.07.
In the broad market, losers still outnumbered winners by 15 to 9 on the New York Stock Exchange, and most market indexes closed lower, albeit modestly so. Volume was nearly 520 million shares on the NYSE, the sixth-heaviest ever.
“My impression is that we got to a level and buyers just came in,” said Ed Lavarnway, head stock trader at First Albany Corp.
Analysts said that investors’ initial concern over the wholesale inflation report moderated upon closer inspection of the data, which was skewed by higher oil prices.
Yet some traders pointed to the ongoing rise in the Commodity Research Bureau’s index of 17 raw materials futures prices--now at its highest level since July, 1988--as evidence that inflation overall may accelerate later this year.
The CRB index rose again Thursday, adding 0.7% to 260.66, as grain prices rocketed anew. The government, in a surprise report, forecast that wheat stockpiles will fall to their lowest level in half a century. Oil prices also continued to surge, as oil inventories decline and refiners scramble to locate supplies.
“The market has a case of jitters about inflation,” said Robert McCool, a trader at First Chicago Capital Markets. Higher inflation erodes the value of financial assets and also “cheapens” the worth of corporate earnings.
Investors get another inflation report today, when the government releases March consumer inflation data.
Many stock analysts concede that the mood on Wall Street is getting gloomier. Not only are inflation and interest-rate concerns taking a toll, but it is unclear whether first-quarter corporate earnings reports will on balance meet expectations.
And the strong dollar, a byproduct of the resilient U.S. economy, also is working against major blue-chip stocks because it threatens their overseas earnings.
The dollar jumped to 1.502 German marks Thursday in New York from 1.497 Wednesday, and inched up to 108.41 Japanese yen. Early today in Tokyo the dollar crossed 109 yen.
Among Thursday’s highlights:
* Among blue chips, Boeing lost 1 3/8 to 79 1/8, DuPont fell 1 7/8 to 80 7/8 and GE eased 1 to 75 5/8, while Caterpillar jumped 2 1/8 to 68 5/8 and IBM rose 1 1/2 to 117 1/2.
* Retail stocks helped the market recover, thanks to healthy March sales reports. Sears shot up 2 1/2 to 48 7/8, Ross Stores rocketed 3 3/4 to 30 5/8, Woolworth gained 1 3/4 to 17 3/8 and Dayton Hudson jumped 1 5/8 to 86 5/8.
* Among companies reporting quarterly earnings, Safeway surged 2 to 30 1/4, International Rectifier rose 5/8 to 20 1/2 and Boise Cascade gained 3/4 to 42 1/8, but Federal National Mortgage sank 1/2 to 29 3/8, Zebra Technologies tumbled 3 1/4 to 19 1/4 and J.P. Morgan dropped 1 7/8 to 77 1/8.
Also, computer chip maker Altera plunged 12 3/8 to 49 1/8 after warning of slowing sales growth.
Overseas, many foreign markets dropped, following Wall Street’s Wednesday plunge. But the declines were generally modest. Tokyo shares eased just 0.5%, Frankfurt fell 0.8% and Mexico City was off marginally.
