Dow Wrenched to 98-Point Loss; Bonds Hold Steady
Blue-chip stocks slumped for the second session in a row Thursday after a roller-coaster ride that saw the Dow fall, recover some losses and then drop sharply in late trading.
The Dow Jones industrial average ended down 98.81 points, or 1.54%, at 6,303.71--its biggest point loss since mid-July--after giving back an early gain of 35 points. On Wednesday, it fell 71 points amid a host of bearish market rumors.
“Investors were whipsawed,” said Philip Orlando, chief investment officer at Value Line Asset Management. “They were emboldened at the opening from two fabulous economic reports, and then a wave of computer-driven sell orders took the market hostage. Trading is still nervous.”
The New York Stock Exchange, in a turbulent session, imposed trading curbs twice as the 30-stock Dow industrials fell 50 points in midafternoon, recovered somewhat, then plummeted again in late trading.
“It has become clearly evident that we have already seen the high for the Dow for the short term,” said Richard Cripps, chief market strategist of Legg Mason Wood Walker. “There is a loss of momentum in the stock market.”
The index of blue-chip stocks has now fallen 3.7%, or 244 points, since reaching a record 6,547.79 on Nov. 25. But the Dow is still up more than 23% since the year began.
Stocks started the day higher, with the Dow up as much as 34 points, after three encouraging economic reports, but the rally was over in the first hour.
Stocks and bonds rose early after the Commerce Department said its consumer price index climbed a moderate 0.3% in November for the third straight month.
Commerce also said retail sales posted a surprising 0.4% drop in November. A third report showed that the slowing economy was not having a significantly adverse effect on labor markets.
“The psychology of the market has really changed,” said Michael Metz, market strategist at Oppenheimer & Co. “There is anecdotal evidence that cash is drying up.”
Broad-market indexes ended lower. But the Nasdaq composite put up a good fight, treading water on the strength of technology issues until the last hour of trading, when it slumped 10.79 points to 1,298.33.
The Standard & Poor’s 500-stock index fell 11.43 points to 729.30, the NYSE’s composite index fell 5.25 points to 384.29, and the American Stock Exchange’s market value index fell 4.81 points to 579.11.
The bearishness was limited to the stock market, with bonds holding steady for much of the day. The Treasury’s 30-year bond price edged up, with its yield slipping to 6.62% from 6.63% on Wednesday and 6.49% on Tuesday.
Bonds warmly greeted the lower retail figures, which suggest that the economy is slowing as expected and that inflation is still not a threat.
Among Thursday’s highlights:
* Consumer stocks were hit especially hit. The Dow industrials were led lower by IBM, which fell 4 1/2 to 151 5/8. Philip Morris fell as much as 2.7% as shares began trading “ex-dividend,” meaning ownership of the stock no longer carries a fourth-quarter dividend payment.
* Dow component Disney lost 1 7/8 to 70 1/4 on news that Michael Ovitz is stepping down as the entertainment company’s No. 2 executive after trying for a year to share power with his boss, Michael Eisner.
* McDonald’s fell 1 1/8 to 45 5/8 after telling analysts that sales at restaurants open at least a year were off for November and December.
* Computer-related stocks were firmer for most of the day but gave into the selling pressure in the final hour. Intel ended unchanged at 136 7/8, followed by Microsoft, down 2 3/8 to 81. Micron Technology ended up 3/8 at 36 3/8.
* Financial shares, which rallied earlier with bonds, led the market lower. NationsBank fell 3 1/4 to 92 7/8, Banc One fell 2 1/8 to 42 3/8 and First Union lost 2 1/4 to 72 1/2.
BankAmerica, which initially gained 2 1/2 after the company said it would close 120 branches in California next year, slumped 3 1/4 to 94.
* Much of the weakness in the November retail sales report came at auto showrooms, and the news caused Ford Motor to decline 1 to 32 1/8, Chrysler to fall 1 1/2 to 33 1/2 and General Motors to lose 7/8 to 56 7/8.
* Warner-Lambert gained 7/8 to 76 1/4 after winning approval from the Food and Drug Administration to market its new treatment for diabetes.
In overseas trading, the Nikkei index in Tokyo fell 0.33%, but the DAX index in Frankfurt and the FTSE-100 in London each gained 0.21%.
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Giving Some Back
Blue chip stocks, which rocketed in November, also are leading the market’s current pullback. The Dow Jones industrial average now is off 3.7% from its recent record high. How some Dow stocks fell on Thursday, and their declines so far from their 1996 highs:
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Thurs. Change vs. Stock change recent peak Coca-Cola -2.8% -11.0% Chevron -2.6% -10.4% United Tech. -3.2% -9.8% Merck -3.6% -9.5% Disney -2.6% -9.1% Dupont -2.0% -8.7% IBM -2.9% -8.7% 3M Co. -3.5% -5.6% GM -1.5% -4.2% Philip Morris -3.2% -4.4% Dow index -1.5% -3.7%
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