For Wall St., a Bad Day Got Worse in a Hurry
U.S. stocks’ slide on Tuesday was broad and deep, slashing 3% or more from major stock indexes and leaving few sectors unscathed.
Meanwhile, the bond market rallied, but not much. Gold gained nearly $5.
Early today in Asia, Wall Street’s pain was felt as most equity markets turned lower again. At midday, Tokyo’s Nikkei-225 index was off 0.9% at 15,883, after falling 0.9% on Tuesday.
On Wall Street, the selling began early Tuesday, backed off at midday, then resumed in late afternoon. By the close, the Dow industrials had dropped 299.43 points, or 3.4%, to 8,487.31, the lowest finish since March 5.
That left the Dow up 7.3% year-to-date.
The Standard & Poor’s 500 index slumped 3.6% on Tuesday, cutting its year-to-date gain to 10.5%.
The Nasdaq composite index lost 65.46 points, or 3.5%, to 1,785.64. It was the second-biggest point drop ever for the index.
Smaller stocks also continued to plunge. The S&P; small-cap index dove 3.1%, though that was less than the Dow’s loss.
Indeed, it appeared that investors finally are selling the stocks they thought they wouldn’t: the blue-chip multinationals.
Trading volume of 853 million shares on the New York Stock Exchange was second only to the record 1.2 billion shares traded last Oct. 28.
The decline worsened as the day progressed, as computerized sell programs struck in waves. Analysts said it shows how pessimistic many professional money managers have become.
“The selling is feeding on itself,” said Ned Riley, chief investment officer at BankBoston Corp., which oversees $30 billion. “People were indifferent about stock prices and valuations. Now they’re fearful.”
Losers swamped winners by 2,626 to 514 on the NYSE and by 3,504 to 930 on Nasdaq.
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Tuesday’s selling was hastened after analyst Ralph Acampora of Prudential Securities said the Dow could drop 15% to 20% from its recent peak. It already is down 9.1%.
“After being bullish for 3 1/2 years, I’m in the bear camp,” Acampora said.
Yet in the last year, Acampora has been more likely to follow trends than foreshadow them. In June 1997, after a rally in stocks, he predicted the market would mount “an explosive advance” in the second half of the year and the Dow would continue up to 10,000 by summer of 1998.
Instead, beginning in August stocks slumped. In December, Acampora turned cautious and retracted his optimistic call. Two months later, share prices began surging and Acampora reversed himself yet again.
In any case, investors looking to take profits from the nearly 8-year-old bull run can find plenty of reasons today: deepening worries about President Clinton’s legal mess, Asia’s ongoing woes and, perhaps worst of all, the weakest pace of U.S. corporate profit growth since 1991.
All of that at a time when many stocks have been priced at their highest levels ever relative to underlying earnings per share.
Bulls can still be found, to be sure. Robert Froehlich, chief investment strategist at Scudder Kemper Investments, said long-term investors have a valuable opportunity at hand. “Give me a two-year horizon and I think you’ll kick yourself if you didn’t take advantage of this buying opportunity.”
Some investors bought bonds on Tuesday. But the yield on the 30-year Treasury bond just dipped, to 5.63% from 5.65% on Monday.
Gold was a big winner, with near-term futures up $4.80 to $288.80 an ounce. The dollar was little changed.
Among the day’s highlights:
* Bank stocks were hammered, with NationsBank off $4.06 to $74.81, J.P. Morgan down $5.75 to $116.88 and Chase Manhattan down $5.19 to $69.63.
* Drug stocks slid, with Merck down $2.38 to $119.13 and Warner Lambert off $6.31 to $69.13.
* Slumping energy stocks included Mobil, down $2.06 to $65.19, and Chevron, down $2.81 to $78.31.
* In the tech field, Intel dropped $2.88 to $81.94 and Microsoft lost $3.94 to $104.50.
