Dow’s Latest Tumble Erases Most of 1997’s Remaining Gain
The Dow Jones industrial average took its third big spill in four sessions Wednesday, wiping out almost all that remained to this year’s robust gains.
The Dow fell 94.04 points to 6,517.01, trimming 1997’s once-healthy advance to just 1%. Less than a month ago, when it set an all-time high at 7,085.16, the blue-chip barometer was sporting a 10% gain for the year.
The index was sent reeling Thursday and Monday, posting back-to-back losses that totaled nearly 300 points. That was followed by a 28-point rise on Tuesday.
Declining issues outnumbered advancers by more than a 2-1 margin Wednesday on the New York Stock Exchange.
Broad measures also pulled back sharply in the volatile session, which saw the Nasdaq market sink to its lowest level since September.
Notably, in less than a week, the buzz among market analysts has shifted from whether or not the market has entered a “correction”--a term used to describe a pullback of at least 10%--to how steep the correction will be.
“Intellectually, most people felt a correction would be a good thing for the market,” said Russ Labrasca, senior vice president at Principal Financial Securities of Dallas. “But now that we’re in the midst of one, no one is pleased with the pain that goes along with that correction.”
With Friday’s employment report looming over the jittery market, many money managers were reluctant to bargain-hunt. The shortage of buyers and the relatively low trading volume left the market vulnerable to computer-driven sell programs that kicked in repeatedly during the session.
Stocks were pressured again by the bond market, where long-term interest rates flirted with another six-month high, undermining a potential follow-through to Tuesday’s modest rebound.
As bond prices fell, the yield on the 30-year Treasury bond edged as high as 7.10%, threatening to break Monday’s six-month high of 7.09%. But stocks started to rebound in the afternoon as the long bond yield settled back at Tuesday’s 7.07%.
Bond traders were mildly encouraged Wednesday morning after the Commerce Department reported that orders to U.S. factories rose a moderate 0.8% in February.
The increase was slightly below many forecasts, but coming on the heels of a robust 2.5% gain in January, the latest tally represented a record high and reinforced other recent reports portraying vigorous--and potentially inflationary--economic activity.
Those reports have aggravated concerns that the Federal Reserve Board, which last week raised one of its key lending rates to help keep a lid on inflation, will see a need to keep raising interest rates.
“We expect more rate increases coming around the world,” said Thomas Luddy, chief investment officer at J.P. Morgan Investment Management. “That’s important because the bull markets in the U.S. and around the world have been fostered by very easy central bank policies. We are moving from a global tail wind to a global head wind.”
J.P. Morgan, the nation’s 11th-largest money manager, shifted assets out of U.S. stocks and into U.S. bonds this year. U.S. equities will fall during the next 12 to 18 months, Luddy said, while bonds should offer single-digit returns.
The Standard & Poor’s 500-stock list fell 9.53 points, or 1.25%, to 750.11, and is now down more than 8% from its all-time best close of 816.29, set Feb. 18. The NYSE’s composite index fell 4.43 points to 395.37.
The Nasdaq composite fell 15.93 points, or 1.3%, to 1,201.00, recovering slightly from its first trip below 1,200 since September. The index, laden with technology issues and smaller, riskier companies, has now retreated 13.5% from its all-time high of 1,388.06, set Jan. 22.
Among Wednesday’s highlights:
* Financial services concerns, whose profits are hurt by rising interest rates, were again among the most prominent Dow losers: J.P. Morgan fell 3 to 96 7/8, Travelers Group fell 2 5/8 to 47 1/4 and American Express fell 2 to 58 1/2. The Dow’s other big decliner was IBM, down 3 at 133 3/4.
* Oil companies also declined. Exxon fell 2 1/8 to 104 3/4, Chevron fell 1 7/8 to 67 and Mobil lost 2 1/8 to 128 7/8.
* Leading the Nasdaq lower were Intel, down 2 5/16 to 137; Microsoft, down 1 1/4 to 92; and Republic Industries, down 3 3/16 to 28 1/2.
* A number of technology concerns were hit hard on disappointing profit growth.
Project Software & Development tumbled 15 15/16 to 15 5/16, FileNet plummeted 4 7/8 to 11, Cascade Communications declined 3/8 to 26 1/8 and 3Com fell 3/4 to 31 1/2.
* Oregon company Epitope fell 1 1/2 to 8 5/8 on news that its fruit-distributor subsidiary, Andrew & Williamson Sales, recalled strawberries that were linked to a hepatitis A outbreak in schools in the Southland and elsewhere.
Elsewhere, the dollar was boosted by a mixed Japanese economic report and reports suggesting the Fed could raise interest rates again soon. In New York, the dollar settled at 123.25 yen, up from 121.76 on Tuesday.
Overseas, Tokyo’s Nikkei stock average rose 0.9%, Frankfurt’s DAX index rose 0.2% and London’s FTSE-100 fell 0.3%.
