Stock Slide Leaves O.C. on Edge : Local Firms Assess Fallout From Wall Street

By GREG JOHNSON

April 1, 1997 12 AM PT

TIMES STAFF WRITER

Orange County investors held their breath along with the rest of the country Monday as apparent fears about new interest rate hikes prompted the worst two-day loss in stock prices since 1990.

As Wall Street observers struggled to fathom what will follow in the wake of two bearish trading days, local market watchers were divining the developments for clues to what the drop means to county-based businesses and their shareholders.

Anil Puri, an economist at Cal State Fullerton, cautioned investors against assuming that bad news generated by national markets has an obvious and immediate impact locally. Wall Street indices don’t always correlate with regional economic development, he said.

Orange County’s economy often is distanced from national market activity by the fact that many of the region’s important job-generating companies are privately held. And, Puri said, the county’s diverse collection of companies also might blunt bad news.

“I would think that people in Silicon Valley, where the economy is disproportionately dependent upon high-tech industry, would be more affected by a large stock drop than in Orange County,” Puri said.

Most market observers doubted that investors were surprised by two straight drops in key market indices. “There’s been plenty of talk about interest rate increases and the likelihood of a market correction,” Puri said. “So people have had plenty of time to think about things.”

But some publicly traded Orange County companies did seem to be caught in the downward draft from the market movements.

Financial shares nationwide led the plunge, for example, and Pimco Advisors LP, a Newport Beach-based asset management firm, saw its stock price fall by 7.26%.

And on a day when several high-tech stocks, including Microsoft, were battered, Western Digital finished near the top of the county’s biggest one-day losers with a drop of 6.8%, or $4.125 a share, to a closing price of $56.625 a share.

Executives at some smaller companies, including Yorba Linda-based Research Engineers Inc., argued that their stocks were included on lists of big losers Monday only because they trade at lower prices and small price changes translate into big percentage figures.

“Yesterday’s close was a normal swing for us,” said Brian Paul, chief financial officer at Research Engineers. “Obviously, the lower your stock price, the bigger a percentage drop is going to look.” The company’s stock closed Monday at $3 a share. The decline was only 37.5 cents for the day, but that shows up on the loser lists as an 11% drop.

Some market observers suggested that Monday’s 157.11-point plunge in the Dow Jones Industrial Average wasn’t pushed by the same developments that contributed to a 140-point fall on Thursday.

Kevin Skislock, director of research at L.H. Friend, Weinress & Frankson in Irvine, described Monday as “a wild day . . . to be sure.” But he suggested that last week’s drop was fueled by interest rate fears, while Monday’s came as investment fund directors dumped stocks “they no longer wanted to be associated with.”

Some observers suggested that the bad news on Wall Street also would have an impact on Main Street.

Retailers who have been “hanging on by a thread” might be hit hard if consumers rein in spending because of fears the market will move lower, said Robert Bach, national director of market analysis for Grubb & Ellis Co.

But Bach said the falling market might make Southern California’s real estate market more attractive to investors.

“I think that homes in Southern California, including many parts of Orange County, are a good buy right now,” he said. “For many people, investing money in a South Orange County home might be more attractive now than investing in the stock market.”

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Market Drop

The Bloomberg Orange County Index, a weighted index designed to measure performance of major Orange County stocks, fell 1.92 points Monday from last week’s close. Hourly closing index levels, Eastern Standard Time:

9:30 opening: 138.95

Close: 137.06

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The Day’s Losers

Ten Orange County stocks with the largest percentage decrease in value:

1. Standard Pacific, Costa Mesa, home builder: -15.3%

2. Pia Merchandising, Irvine, merchandising and sales services: -12.8%

3. Research Engineers Inc., Yorba Linda, engineering software: -11.1%

4. Smith Micro Software, Aliso Viejo, communications software: -7.7%

5. Pimco Advisors, Newport Beach, investment management: -7.3%

6. Western Digital, Irvine, computer hardware: -6.8%

7. Odetics Inc., Anaheim, digital data management products: -6.3%