Dow Manages to Keep Above 8,000 Mark, but It Loses 114 More Points
The Dow industrials held above 8,000, but that was just about the only positive Friday on Wall Street, where stocks extended the steepest drop since 1990.
Several attempted rebounds from Thursday’s 357-point plunge unraveled as soon as they began, with the Dow falling another 114.31 points to 8,051.68 by Friday’s close.
The Dow, which has fallen 550 points in just three sessions, is now 1,268 points, or 13.8%, below the July 17 record of 9,337.97. That’s the steepest drop since a 20% slide triggered by the Persian Gulf crisis in the summer and fall of 1990.
Just before noon, the Dow nearly traded below 8,000 for the first time since late January, sliding 154 points to 8,011. Even with the small recovery, however, the Dow has seen this year’s gain shrink from 18.1% to just 1.8%.
The market’s decline has been fueled by worries about how much and how long company profits will suffer with the Asian fiscal crisis stretching into a second year. Fears that the new crisis in Russia could threaten to slow the European economy or even spread to Latin America have also weighed on the market.
“Psychologically, a close below 8,000 would be a negative,” said Bob Dickey, managing director of technical analysis at Dain Rauscher Wessels in Minneapolis, asserting that the market’s summer slide is nearing a bottom.
“What’s bothered me has been how weak the market’s been near the close the last few days,” Dickey said. “Investors don’t want to be at risk overnight and especially over a weekend. If we do get more bad news, it could set us up for [more selling] on Monday morning.”
“This market is driven by psychology, and that 8,000 level is very important for psychological reasons,” said Gail Dudack, chief investment strategist at UBS Securities.
“Investors have seemed to remain complacent above 8,000, but we’re watching to see if a move below causes changes like more mutual fund redemptions,” she said. The Dow set a low Friday of 8,011.52.
The technology-heavy Nasdaq composite index fell 46.73 points to 1,639.68, while the Standard & Poor’s 500 fell 15.45 points to 1,027.14.
Declining issues outnumbered advancers by nearly a 2-1 margin on the New York Stock Exchange.
Trading was heavy again, with 1.974 billion shares changing hands on the three major U.S. markets (NYSE, Nasdaq and the Amex), the fifth-busiest day in U.S. stock market history.
On Thursday, more than 2 billion shares were traded for only the second time.
Individual investors who were rattled by Thursday’s decline were demonstrating some renewed confidence on Friday, according to some leading mutual fund companies.
At Dreyfus and Janus, investors moved some money from equity funds on Thursday. By Friday, many were moving their holdings back to stock funds, the companies said.
Friday’s selling was hardly as ferocious as on Thursday, when the Dow fell 4.2%, or 357.36 points, the third-biggest point drop ever behind the 554.26-point plunge last Oct. 27 and the 508-point crash 10 years earlier on Oct. 19, 1987.
But investors targeted some of the stocks that have held up best in the recent decline, including Dell Computer, which fell $6.31 to $118.75; America Online, down $8.75 to $96.25; and Wal-Mart, down $2.50 to $65.38.
The dumping of those highly liquid shares could mean that mutual fund portfolio managers were raising cash for next week, worried that investors might begin selling stock funds again if the broad market should begin to slide anew.
For the market overall, “You have got to characterize this more as a bear market than a correction. You can’t just look at the Dow down 10% to 15%,” said James Volk, co-director of institutional trading at D.A. Davidson & Co.
In Tokyo, the main stock index dove 3.5% to a 12-year low amid continuing worries about stalled efforts to revive the economy. Hong Kong’s key index fell 1.2% as the government announced that the once-booming economy there has fallen into recession as well.
The Dow’s renewed retreat cut short a midafternoon recovery bid in Europe. Exchanges in London, Paris and Frankfurt all finished lower, although the damage was not nearly as bad as it had been in the morning, when key indexes were off by about 5%.
The German market ended off 1.3%. The French market fell 1%.
The yield of the bellwether 30-year Treasury bond edged down to 5.33% from 5.43% Thursday.
Market Roundup, D4
Damage Control
* The global market sell-off continued, but without the intensity of Thursday’s plunge. A1
* Russian President Boris N. Yeltsin insists on finishing term, but will relinquish a portion of authority. A1
* Timing of U.S.-Russia summit next week in Moscow is nettlesome, as Clinton rewrites agenda. A1
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Taking Stock of a Dismal Week
Stocks worldwide suffered some of their worst losses of the post-World War II era this week, amid fear over Russia’s economic collapse and spreading turmoil in global markets.
Blue Chips: Deepest Slide Since ’90
The Standard & Poor’s 500 index is in its steepest decline since the bear market of 1990, which was triggered by Iraq’s invasion of Kuwait. Major S&P; declines in the ‘90s:
Since July 17: -13.4%
Oct. 1997: -10.9%
Feb.-April 1997: -9.6%
May-July 1996: -7.6%
Feb.-April 1994: -8.9%
July-Oct. 1990: -19.9%
Emerging Markets: Mounting Losses
Investors in stock mutual funds that own emerging-market shares now have lost nearly half of their money over the last year. One-week and 12-month losses in key fund categories, through Thursday:
Emerging markets (diversified)
Week loss: -13.4%
12-month loss: -45.9%
*
Latin American
Week loss: -16.3%
12-month loss: -48.8%
*
Asia (excluding Japan)
Week loss: -3.6
12-month loss: -53.4
Even the ‘Favorites’ Sink
By Friday, investors were dumping even some of their favorite stocks of the recent bull run. A look at some of Friday’s big losers:
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52-week Friday close Friday Stock high and change pct. change Yahoo Inc. $103.75 $83.06, -$8.00 -8.8% Apple Computer 43.75 34.19, -3.31 -8.8 America Online 140.50 96.25, -8.75 -8.3 Dell Computer 129.38 118.75, -6.31 -5.0 Gap Inc. 68.00 56.38, -2.63 -4.5 Wal-Mart 69.81 65.38, -2.50 -3.7 Microsoft 119.63 105.25, -4.00 -3.7 Colgate-Palmolive 98.88 77.94, -2.94 -3.6 Coca-Cola 88.94 72.75, -2.00 -2.7 Lucent Tech. 108.50 81.00, -1.69 -2.0 S&P; 500 index 1,186.75 1,027.25, -15.34 -1.5
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Source: Bloomberg News; Lipper Analytical Services
