World Markets Bear Down
The Dow Jones 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 rout unraveled as soon as they began, with the Dow falling 114.31 more points, or 1.4%, 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 its July 17 record high of 9,337.97. That’s the steepest drop since a 21% 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. The low for the day was 8,011.
The market’s decline has been fueled by worries about how much and how long U.S. corporate 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, and spread to other emerging markets--especially Latin America--also have weighed on the market.
Some analysts said the overwhelmingly negative tone that persisted on Wall Street on Friday--as losers swamped winners by 2,213 to 918 on the New York Stock Exchange--suggested no end is in sight to the market’s decline.
Others, however, noted that there was some improvement in the market beyond the obvious smaller percentage declines than in Thursday’s session, when the Dow plunged 4.2%.
While 998 NYSE stocks hit new 52-week lows on Thursday, the number was cut to 817 on Friday.
Analysts said it will be key for the Dow, as the most widely watched index, to hold above 8,000 next week.
“Psychologically, a close below 8,000 would be a negative,” said Bob Dickey, analyst at Dain Rauscher Wessels in Minneapolis. He believes that level will hold, and that the market’s summer slide is nearing a bottom.
Still, “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, strategist at UBS Securities.
In the broader market the Nasdaq composite index fell 46.73 points Friday, or 2.8%, to 1,639.68, boosting its decline for the week to 8.8%--and slashing its year-to-date gain to just 4.4%.
At its peak this year the Nasdaq index was up 29% from Jan. 1.
The Standard & Poor’s 500 fell 15.45 points, or 1.5% on Friday to 1,027.14. It fell 5% for the week, less than the Dow’s 5.7% drop.
The S&P; index still is up 5.8% year-to-date. The Dow is up 1.8%.
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 history.
The stocks investors targeted for sale on Friday included many of those 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.
On the other hand, the fact that selling has finally hit those stocks--the market’s “sacred cows”--also might indicate that the current sell-off is running its course, some analysts said.
In any case, many investors already have suffered typical bear-market declines, as many individual stocks have fallen 20% to 50% from their peaks.
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.
Financial stocks also were hit hard on Friday, on concerns about foreign loan and trading losses amid the carnage in emerging markets. Merrill Lynch plunged $4.81 to $73.50. J.P. Morgan sank $7 to $97.75.
Meanwhile, investors’ appetite for bonds waned on Friday. The yield on the 30-year Treasury bond dipped to a record low 5.33%, but that was down only slightly from 5.34% on Thursday. A week ago the yield was 5.45%.
“When you look at yields, they’re [long-term bonds] not very attractive,” said Michael Faust, who manages about $400 million in bonds at Bailard, Biehl & Kaiser in San Francisco.
Instead, some investors flocked to shorter-term Treasury bills, sending the yield on 3-month T-bills down to 4.91% Friday from 4.97% on Thursday.
Stocks 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%.
In Canada stocks lost 0.6% to 5,766.31, after crumbling 6% Thursday, when the country’s central bank raised interest rates to defend the Canadian dollar.
The dollar was a surprise loser on Friday: It suffered its biggest loss against the German mark in three years, falling 4 pfennigs to 1.759 marks. Traders said expectations of a Federal Reserve interest rate cut in coming months weighed on the dollar.
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
