Dow Slides Amid High Anxiety
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 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 2,872 to 360 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.
Yields on U.S. Treasury securities tumbled to record lows, 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.
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 individual issues on Thursday, bank stocks were shredded on fears that a meltdown in Russia would not only result in defaults on loans there but also might “set a pattern for Asia and other struggling markets,” one NYSE trader said.
Republic New York Corp. announced that losses on its Russian investments would force it to take a charge of $110 million in the third quarter, substantially wiping out its earnings for the period. Its stock dropped $4.63 to $45.50.
Among other big-bank stocks, Citicorp lost $10.50 to $122.50, Chase Manhattan fell $6.13 to $58.13, J.P. Morgan slid $13.19 to $104.75. The Philadelphia Stock Exchange banking index fell 5.9%.
Brokerages also were pummeled on fears of emerging-market losses and a possible bear market. J.P. Morgan dropped $12.44, or 11%, to $105.50, Donaldson, Lufkin & Jenrette fell $4.44 to $40.94, and Lehman Bros. sank $7.19 to $50.50.
Shares of big companies such as Coca-Cola (which generates more than two-thirds of its profit overseas), Procter & Gamble and Colgate-Palmolive fell as investors surmised that their earnings might be hurt by shrinking markets abroad.
Coke fell $4.44 to $74.75, P&G; lost $2.31 to $80.56 and Colgate fell $4.75 to $80.88.
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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
