Stocks Fall, Dollar Gains as Asian Crisis Continues

Stocks fell sharply, bonds soared, the dollar posted a modest recovery, and grain prices came under pressure Thursday as reverberations from Japan’s economic woes continued to affect U.S. markets.

Stocks were pressured by continued concern about Asia’s economic troubles and a bearish forecast from one of Wall Street’s longtime bulls.

Investors were uneasy about the prospects that weak Asian economies will hurt the earnings of U.S. multinational companies.

The Dow Jones industrial average ended down 110.91 points, at 7,846.50.

In the broader market, declining issues beat advances by a 19 to 10 margin in heavy trading on the New York Stock Exchange. The Nasdaq composite index was off 24.18 points, at 1,523.19.

The Standard & Poor’s 500-stock list fell 10.24 points to 955.30, and the NYSE composite index slipped 4.90 points to 501.69.

Ralph Acampora, director of technical research at Prudential Securities’ chief technical strategist, forecast a bear market in 1998.

Wall Street also focused on a government report on the latest trade deficit amid predictions the numbers will likely begin deteriorating as the Asian economic crisis starts to be felt in the coming months.

“In a nervous market, when one of Wall Street’s best known technicians who has been a big bull turns bearish, it causes people to say ‘I don’t know whether he is right, but I think we should be a little more cautious,’ ” said Alfred Kugel, Stekugelin Roe & Farnham’s senior investment strategist.

The day’s trading can be summed up in one word, said Jennifer L. Moran, economist at Donaldson, Lufkin & Jenrette Securities: “ugly.”

Concern over the vulnerability of stocks has driven investors to safer bonds, driving the yield of the benchmark 30-year bond down to 5.93%, near the four-year low it reached Dec. 12. It was at 6.00% on Wednesday.

“It’s a concern that the first-quarter earnings are going to be weaker, especially with multinational corporations,” said Jim Herrick, managing director of trading for Robert W. Baird & Co. in Milwaukee.

Though many firms have blamed sales stumbles on slackening Asian economies, Herrick said, “what you actually may be seeing is more of a fundamental slowdown.”

Among the mixed signals sent Thursday was a Commerce Department report that said although America’s trade deficit with the rest of the world narrowed sharply in October, the U.S. deficit with Japan soared to the highest level in 2 1/2 years.

Even with the overall trade-gap improvement, the trade deficit through the first 10 months of this year is running at an annual rate of $114 billion, worse than last year’s $111 billion imbalance.

In another report, the National Assn. of Manufacturers said it expected Asia’s deepening crisis and the strong dollar to “significantly” dampen U.S. exports next year.

Among Thursday’s highlights:

* Multinational banks doing business in Asia were hit, with Bankers Trust down $3.81 at $121; Chase Manhattan down $2.94 at $109.06; and Citicorp down $2.38 at $129.13. J.P. Morgan led the Dow’s losers, down $3.13 at $118.88.

* Technology firms also suffered, with Microsoft falling $4.56 to $131.06 as the antitrust battle with the Justice Department escalates.

In currency trading, the dollar rebounded from Wednesday’s sell-off to rise against the Japanese yen amid questions of whether the Bank of Japan would prop up its currency and concerns that Japan’s measures to stimulate its economy were not enough.

The dollar rose to 128.72 yen in late New York trading from 127.08 yen late Wednesday, but it was off its intraday high of 129.45. It edged higher against the German mark to 1.7745 from 1.7740.

In commodity markets, wheat, corn and soybeans were lower at the Chicago Board of Trade on concerns that the bankruptcy filing by Japanese grain firm Toshoku Ltd.--the fourth-largest bankruptcy in postwar Japan--could point to trouble at other Japan grain firms.

Japan is the largest buyer of U.S. agriculture commodities, taking $10.7 billion worth in fiscal 1997, and traders feared bankruptcies by other grain firms could prompt cancellations of grain that has been sold but not shipped.