Shares Sink as Volume Skyrockets
U.S. blue-chip stocks fell into official “correction” territory on Thursday, as markets worldwide suffered their worst overall losses since October.
In its third-biggest point loss ever, the Dow Jones industrial average fell 357.36 points, or 4.2%, to 8,165.99, closing at its lowest level of the day.
The damage was widespread, although it was focused in financial-related stocks, commodity-related companies and some industrial issues--all of which are vulnerable to rising fears of deflation and-or financial-system turmoil.
The market, which began plummeting at the opening bell as Russia’s financial collapse worsened, saw several rally attempts throughout the session. But they all failed, and blue chips careened lower again as the close of trading approached.
Volume was the second-heaviest ever, with 939 million shares changing hands on the New York Stock Exchange--a figure eclipsed only by the 1.2 billion shares that traded Oct. 28, when the market was recovering from the previous day’s 554-point Dow plunge.
Losing issues swamped gainers by 2,875 to 378 on the NYSE.
The Nasdaq composite index slid 81.72 points, or 4.6%, to 1,686.41. It was the second-worst point decline for the technology-dominated index and its sixth-worst drop in percentage terms.
The Russell 2,000 index of smaller stocks closed down 14.32 points, or 3.8%, at 366.10. The Russell is now down 25.5% from its April 21 record high, marking the first bear market for that index since 1990.
For the Dow and the Standard & Poor’s 500 index, however, until Thursday the two blue-chip indicators had only flirted with “correction” territory--meaning a 10% decline from their record highs.
But both indexes descended decisively through that barrier Thursday and are now more than 12% off their July 17 peaks.
“We’ve broken through so many support levels that the remaining ones don’t have much meaning,” Peter Henderson, managing director of Henderson Bros., said from the floor of the NYSE.
Wall Street’s sell-off also pushed the dollar down on world markets. The dollar closed at 1.797 German marks, off from 1.807 Wednesday. The greenback also plunged to 142.18 Japanese yen from 144.02.
Meanwhile, yields on U.S. Treasury securities fell again, to record lows on long-term issues, as investors bid for them frantically in search of a safe haven. The yield on the bellwether 30-year Treasury bond plummeted to 5.34%, down from 5.42% Wednesday.
On Wall Street, stocks were pummeled in every industry and size category. All 30 of the Dow industrials lost ground; there were only 25 advancing issues in the S&P; 500, and only four of the top 100 Nasdaq stocks posted gains.
More than 900 NYSE stocks hit new 52-week lows Thursday, which market technician Peter Eliades asserted was a record.
But could Thursday’s action have been a “selling climax” after five weeks of mostly falling prices?
A cascade of negatives--and extremely heavy trading volume--sometimes indicates that a market is nearing at least a short-term bottom.
But numerous Wall Streeters expressed caution Thursday, saying there still hasn’t been the sense of capitulation by die-hard bulls that would be expected to signal a bottom.
“By the numbers--the large volume, the absolute change--you’d say we’re having a climactic sell-off, but for some reason you just don’t get that sense of urgency,” said Joseph A. DeMarco, chief trader for HSBC Asset Management in New York.
Arthur Cashin, chief of NYSE floor operations for PaineWebber, noted that many sellers Thursday were still using “limit” orders, or specifying a minimum price below which they would not trade. In an outright panic, investors would sell stocks “at market”--that is, at whatever price a buyer can be found.
“Panic is when the fear of losing money overcomes the fear of being thought stupid,” Cashin said. On Thursday, at least, pride was still winning out, he said.
Several traders worried that an even worse plunge could occur today, as investors look anxiously toward a weekend of further global uncertainty.
“I wouldn’t want to be long anything overnight,” agreed Meredith Siegel, a trader at Cantor Fitzgerald, who quipped that the best move would be “investing in antacids rather than equities.”
If looking at the world map isn’t enough to scare investors, how about looking at the calendar? Since 1946, September has been more likely to be a down month for stocks than any other month of the year.
However, there is some big money on the other side of that bet.
Stanley Druckenmiller, chief investment strategist for George Soros’ $22-billion hedge fund family, said Wednesday that U.S. equity markets were the world’s most attractive and predicted a powerful upsurge in large-capitalization stocks soon.
Among Thursday’s highlights:
* The tech sector was hit hard, with Intel down $3.25 to $79.75, IBM off $5.63 to $125.25 and Dell down $3.56 to $125.06.
* Profit-takers also clipped drug stocks. Merck fell $4.25 to $129.13, Pfizer lost $4.13 to $103.88 and Lilly sank $3.13 to $74.
* Some consumer multinationals fell as investors focused on the potential for weaker growth overseas. Coca-Cola (which generates more than two-thirds of its profit overseas) sank $4.44 to $74.75, Procter & Gamble lost $2.31 to $80.56 and Colgate-Palmolive fell $4.75 to $80.88.
* Industrial and commodity issues sinking included Alcoa, down $3.19 to $59.31; International Paper, down $1.56 to $39.44; and Goodyear, down $3.31 to $48.19. Oil stocks also were broadly lower.
* The few gainers included some electric utilities. DTE Energy rose 25 cents to $42.38; PG&E; gained 25 cents to $31.81.
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Markets: From Bad to Worse
Global financial markets were wracked anew with fear Thursday in the wake of Russia’s financial collapse and apparent gridlock in Japan over proposals to bail out the country’s banking system. On Wall Street the Dow industrials fell 357.36 points, or 4.2%, to close at 8,165.99, in the second-heaviest trading day ever.
Stocks Plunge Worldwide . . .
Changes in key share indexes Thursday and year-to-date, in local currencies:
*--*
Country/index Thurs. change YTD change Hong Kong/Hang Seng +1.1% -26.1% Singapore/S.T. -1.6 -40.5 Japan/Nikkei-225 -3.0 -5.5 Britain/FTSE -3.2 +4.5 Germany/DAX -3.3 +19.1 U.S./S&P; 500 -3.8 +7.4 U.S./Dow indus. -4.2 +3.3 France/CAC -4.3 +24.9 U.S./Nasdaq compos. -4.6 +7.4 Canada/TSE-300 -6.0 -13.4 Mexico/Bolsa -6.1 -41.6 Brazil/Bovespa -10.0 -35.1
*--*
. . . Led by Financial-Related Shares . . .
Worst-performing groups Thursday in U.S. S&P; 500-stock index:
Investment banks/brokerages: -8.8%
Consumer lenders: -7.1%
Autos: -6.7%
Oil-field services: -6.7%
Can/bottle makers: -6.6%
Major banks: -6.6%
Engineering/construction: -6.5%
Gold mining: -6.4%
Financial (misc.): -5.8%
Airlines: -5.6%
. . . As Falling Commodities Worsen Deflation Fears
CRB-Bridge index of 17 major commodities, weekly closes and latest:
Thursday: 196.24
Source: Bloomberg News
Out of the Money
Shares in major banks and financial companies were hammered Thursday. Among the casualties:
*--*
Stock Thurs. close Change % Change Lehman Bros. $50.44 -$7.25 -12.6% PaineWebber Group 39.13 -5.13 -11.6 J.P. Morgan 104.75 -13.19 -11.1 Bear Stearns 43.81 -4.94 -10.1 Donaldson Lufkin 40.88 -4.50 -9.9 Chase Manhattan 58.13 -6.13 -9.5 Charles Schwab 32.63 -3.31 -9.2 Bankers Trust 83.81 -8.31 -9.0 Citicorp 122.00 -11.88 -8.9 Morgan Stanley D.W. 69.56 -6.50 -8.6 Merrill Lynch 78.31 -4.13 -7.5 S&P; 500 -3.8
*--*
Source: Bloomberg News
