Dow Loses 167; Crude Hits New 12-Year Low
Blue-chip stocks on Thursday tumbled for the third time in two weeks, as investors focused on a growing number of corporate earnings disappointments and on the presidential impeachment showdown in the U.S. House.
Rising jitters depressed stocks from the outset and pulled the Dow Jones industrials down 167.61 points, or 1.9%, to 8,841.58 by the market’s close.
Meanwhile, another wave of declining prices in commodities markets sent crude oil to a new 12-year low.
On Wall Street, investors dumped big-name multinational stocks on worries that earnings will remain under pressure well into 1999 because of weak demand in many foreign markets.
Coca-Cola, for example, fell $1.06 to $66.06, bringing its decline since Nov. 23 to 12%. Brokerage Morgan Stanley Dean Witter said Thursday that it expects Coke’s fourth-quarter earnings to be 15% below year-earlier results because of weakness abroad.
Other blue-chip stocks falling sharply included drug giant Merck, down $5.69 to $146.25 one day after warning analysts to lower 1999 expectations modestly; 3M, down $3.25 to $74.50; and McDonald’s, down $2.56 to $67.75.
“You have the outlook deteriorating” for many companies, said Mark Turner, a money manager for Turner Investment Partners in Berwyn, Pa., which manages $2 billion. “That makes us cautious.”
Many technology and telecommunications shares were hit after L.M. Ericsson, a major producer of mobile phones, said its 1998 and 1999 results will be down sharply because of slow sales in Asia.
Ericsson shares plunged $4.75 to $24.13 in heavy trading on Nasdaq. The tech-heavy Nasdaq composite index, which hit a record high Wednesday, fell 34.46 points, or 1.7%, to 2,015.96.
In the broad market, losers topped winners by 21 to 9 on the New York Stock Exchange and by 26 to 16 on Nasdaq, although trading volume was not extraordinarily heavy.
Investors’ worries about corporate earnings--the basic underpinning for stock prices--have been present all year, but now are heightened because the new year is almost here, and because stock prices have risen sharply from their lows of September and October, analysts say.
Higher share prices mean there’s greater potential for stocks to collapse on any profit shortfall.
Still, the earnings news isn’t all bad. Indeed, after the market closed, database software giant Oracle Corp. reported quarterly earnings up 46%, beating Wall Street expectations.
Even so, more investors may have itchy trigger fingers these days, given stocks’ heights, analysts say. And the looming votes on President Clinton’s impeachment aren’t helping the market’s mood.
The impeachment threat “is making everybody kind of jittery,” said Greg Tuorto, a money manager for Tocqueville Asset Management, which oversees $1.2 billion. “If you have an impeachment trial in the Senate, that’s six months of where the government is basically paralyzed.”
The continuing decline in commodity markets also may be hurting Wall Street, because it reminds investors that the threat of global deflation still is out there.
January crude oil futures fell 44 cents to $10.72 a barrel on the New York Merc, the lowest closing price since 1986.
Another confrontation between Iraq and United Nations weapons inspectors produced no response from the United States--and thus no threat that Mideast tensions might dry up the global oil glut.
Hog futures fell 6%, the seventh drop in as many days. The U.S. hog herd is the biggest ever, depressing prices. Near-term hog futures ended at 21 cents a pound in Chicago, lowest since 1971.
The Goldman Sachs commodity index of 22 internationally traded commodities lost an additional 1.3% to 129.71 points, a new 26-year low.
The only big winner in domestic markets Thursday was the Treasury bond market, where long-term yields fell--in part because some money shifted from stocks to bonds.
The 30-year Treasury bond yield fell from 4.98% Wednesday to 4.95%, lowest since Oct. 7.
“The decline in commodity prices really underlines the positive outlook for inflation, and that’s helping Treasuries push higher,” said Kirit Shah, the chief markets strategist at Sanwa International.
Market Roundup, C6
