Dow Broadsided by Fresh Fears About Earnings
The stock market suffered a broad hit Monday amid growing worries about corporate earnings and the potential impeachment of President Clinton.
Treasury bond yields fell as some safety-seeking investors moved from stocks to bonds. The dollar weakened, reflecting foreigners’ nervousness, analysts said.
The Dow Jones industrial average ended off 126.16 points, or 1.4%, at 8,695.60, the lowest close since Oct. 30.
The broad market fell even more sharply. The Nasdaq composite index, which last week hit record highs, tumbled 62.39 points, or 3.1%, to 1,966.92 as investors cashed in profits from the recent run-up in some big-name technology stocks.
Falling stocks outnumbered winners by 23 to 8 on the New York Stock Exchange and by 29 to 11 on Nasdaq, in active trading, although nowhere near the heavy volume of September and October.
Worries about corporate earnings have risen during the last week, as a growing number of companies have warned that results in the near-term will be below expectations.
What’s more, the now strong possibility that the U.S. House will force Clinton to stand trial in the Senate is unnerving many investors.
“People hadn’t been paying any attention to the impeachment process until recently, and now the reality of the situation [is dawning on them],” said John MacNeil, stock strategist at Salomon Smith Barney.
Others said the market’s decline is simply an overdue pullback after the sharp October and November gains.
“This is a market in the midst of a correction that should have happened two or three weeks ago, but the market was enthralled with Internet mania,” said Scott Bleier, chief investment strategist at Prime Charter Ltd., a New York investment bank.
“The impeachment thing is a distraction,” he said. “They’re not going to get a two-thirds majority in the Senate.”
Also unsettling was a fresh sell-off in the Brazilian stock market, which fell 8.5% amid concern about the country’s efforts to deal with its fiscal problems. Brazil’s central bank was reported to be selling dollars to deal with heavy outflows of U.S. currency.
Brazil’s slump dragged the Argentine market down 5.9% and the Mexican market down 1.3%.
In Tokyo, the main stock index slumped 2% to 14,111, a five-week low, on a new business survey showing that conditions have worsened in the beleaguered Japanese economy.
The U.S. dollar itself was under pressure, falling nearly 1 yen to 115.49 yen in New York.
“Now that the potential for impeachment is growing, international money is starting to pull out,” said Mara Glassel, vice president of Prudential Securities’ Equity Focus Group. “Foreign investors see this as a less politically stable place to put their money.”
Still, Treasury bonds rallied as some investors sought safe haven. The yield on the 30-year T-bond fell to 4.99% from 5.02% on Friday.
Bonds withstood a sharp turnaround in many depressed commodity prices.
Crude oil jumped 5%, the biggest jump since Oct. 21, after Mexico, Saudi Arabia and Venezuela said they’ll meet this week, raising speculation that Venezuela’s president-elect will support cuts in oil production.
January crude oil futures rose 50 cents to $11.29 a barrel on the New York Mercantile Exchange. Even after Monday’s rise, crude oil prices are down 38% from a year ago.
Among Monday’s highlights:
* Major tech names stumbling included Intel, down $4.88 to $111.56; Microsoft, down $6.06 to $127.94; IBM, down $5.13 to $162.88; and Cisco Systems, down $3.13 to $80.38.
“The techs were the ripest for profit-taking,” said Peter Coolidge, senior equity trader at Brean Murray & Co. “People have been reluctant to sell them since they were so strong, but they ended their rally with a bang.”
Many Internet-related names, however, did not suffer major hits, relative to their high prices. EBay fell $3.50 to $188.50; Yahoo lost $4.44 to $191.25.
* Drug stocks also were hit, with Bristol Myers down $4.06 to $121.06, Lilly down $2.25 to $87.69, Alza down $3.06 to $49 and Pfizer off $3.25 to $111.63.
* Major financial shares were weak, led by Merrill Lynch, down $4.13 to $61.88, and BankAmerica, down $2.50 to $56.38.
* Mattel led stocks falling on earnings woes, after it announced a profit shortfall and a major acquisition. The stock dove $8.13 to $22.
Among other companies that have recently warned of earnings shortfalls, J.P. Morgan fell $3.44 to $97.06 and Telxon dropped $1.69 to $13.31. But Coca-Cola rose 56 cents to $63.44 after diving $3.19 on Friday when it forecast weak near-term profits.
* On the plus side, Nike gained $2.13 to $38.13. The company is expected to report earnings later this week.
* Some oil-related stocks got a lift as crude prices rose. Halliburton rose $1.50 to $32.25, Baker Hughes added 31 cents to $16.81 and Transocean Offshore added 56 cents to $26.13.
Market Roundup, C16
