Dow Slips 28 on Asian, Latin American Worries
The U.S. stock market ended mixed Monday after a volatile session rocked by fresh concerns about Asia’s economic woes and potential spillover into Latin America.
The Dow Jones industrial average lost 28.73 points to 7,552.59, after initially rising as high as 7,656.
In the broad market, most key indexes ended lower, even though winners had a tiny edge over losers on the New York Stock Exchange. And the Russell 2,000 index of smaller stocks eked out a gain of 0.18 point to 435.40.
Technology stocks suffered the brunt of Monday’s selling, on renewed fears about the impact of Asia’s anticipated economic slowdown on tech equipment sales.
What’s more, Brazil’s announcement of a new austerity plan--aimed at lessening the chances that the country will suffer the serious currency devaluation that has struck many Southeast Asian countries--helped boost the Brazilian stock market 2%, but slammed the Argentine and Mexican markets, as investors bet on slower economic growth throughout the region.
Argentina’s key stock index dove 5.7%; Mexico’s lost 2.6%.
Meanwhile, the U.S. bond market again appeared to benefit from stocks’ turmoil. The yield on the 30-year Treasury bond eased to 6.14% from 6.15% on Friday. (Friday’s yield was incorrectly reported in Saturday’s edition of The Times.)
With the Federal Reserve Board’s policymakers set to meet Wednesday, bond market investors are betting strongly that the central bank will refrain from raising interest rates--despite ongoing signs of a very tight, potentially inflationary U.S. labor market.
Analysts say that with global markets very much on edge after October’s stock market slump, the Fed won’t risk triggering another sell-off by tightening credit.
“There is zero chance” the central bank will boost borrowing costs this week, said Robert Fernald, who manages $1 billion in bonds for Society Asset Management Inc. in Cleveland.
(Bond markets will be closed today for Veterans Day. The stock market will be open, however.)
In the stock market, many investors are preoccupied not with interest rates, but with the potential for weaker corporate earnings growth in 1998 if the global economy slows markedly because of Asia’s problems.
Any event that could add to concerns about a slowdown--such as renewed fighting between the United States and Iraq--could send stocks slumping again, analysts warn.
“I don’t see us moving dramatically higher from this point in the near term,” said James Solloway, who helps manage $3 billion at Barnett Capital Advisers Inc. in Jacksonville, Fla. “We’re still going to have some impact from what’s going on in Southeast Asia and Latin America.”
Asian stock markets were mostly lower again Monday, setting a negative tone for Wall Street. Tokyo’s key market index fell 139.16 points, or 0.9%, to 15,697.20, continuing to slide on growing fears that Japan’s economy is poised to slide into deep recession again because of weakening economies across Asia.
In Malaysia, the main stock index dove 2.5%, while the Philippines’ main index sank 2.2%.
Among U.S. market highlights:
* Intel led tech shares lower, falling $2.31 to $75.13 in active Nasdaq trading.
Among other leading technology issues, IBM lost $1.81 to $97.69, Compaq fell $3.06 to $61.19, Dell dropped $2.94 to $75.63 and Texas Instruments lost $4.38 to $108.38.
“The whole thing [the tech sector] got creamed because of the general jitters about Asia,” said Eric Blachno, a computer-networking analyst for Bear Stearns.
* Also in the tech arena, disk drive makers fell for a second day after Read-Rite said it sees earnings for the current quarter below analyst estimates because of weak demand and pricing pressure on its older products. Read-Rite’s warning follows a similar statement last week from disk drive maker Western Digital.
Read-Rite lost $1.69 to $17.50, Western Digital sank $1.88 to $21.75 and Seagate Technology lost $2.06 to $24.19.
* In the biotech field, Centocor lost 17% of its value, dropping $9 to $43.13 after a study of its ReoPro heart attack drug yielded disappointing results.
* CKS Group shares plunged $22.25 to $14 after the company said fiscal fourth-quarter earnings will be far below analysts’ forecasts because sales to its largest customers were lower than expected. CKS designs advertising and multimedia marketing plans including Web sites and videos.
* On the plus, 3M rose $1 to $94 after announcing plans to buy back up to 25 million shares.
In currency trading, the recently streaking dollar was little changed at 124.40 Japanese yen.
On Friday, the dollar surged to a six-month high against the yen, fanning concern that Japanese authorities might sell dollars if the U.S. currency keeps climbing.
“Fundamentally, the dollar should be strengthening [further] against the yen,” said Kosuke Hanao, head of foreign exchange trading at Industrial Bank of Japan. “The only reason it’s not is concern that the Bank of Japan may intervene.”
Analysts said the dollar could soon resume its climb as the yen is dragged down by declining Japanese stocks, concern over the country’s debt-saddled banking system and currency turmoil in Southeast Asia.
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Market Roundup, D18
