Late Surge Erases Early Dow Plunge
Blue-chip stocks closed nearly unchanged Wednesday after a fast-paced rally pulled the Dow Jones industrial average out of a slump of nearly 130 points.
But the U.S. market overall was broadly lower amid continuing worries over plunging Asian currencies and stock prices, and fears that U.S. corporate earnings growth will slow sharply.
Meanwhile, the dollar tumbled and bond yields rebounded from Tuesday’s 20-year lows.
In a wild finish, the Dow index ended down just 3.98 points at 7,902.27 after mounting an 85-point rally in the final 15 minutes of trading.
The late rally also wiped out the bulk of the day’s losses for other blue-chip indexes. But smaller stocks, especially technology issues, suffered bigger declines.
The Nasdaq composite index of mostly smaller issues fell 18.44 points, or 1.2%, to 1,561.70 after trading as low as 1,547.
And losers still topped winners by 18 to 12 on the New York Stock Exchange in heavy trading.
U.S. stocks were pounded at the opening bell after Asian stocks and currencies plummeted anew overnight, raising the risk that the massive international bailouts organized for Indonesia, Thailand and other countries in the region may be unraveling.
Indonesia’s main stock index sank 2% as its currency tumbled to record lows. The selling also hit Singapore stocks, down 5%, and Hong Kong, down 5.9%--both of which have been relatively sheltered from the rest of Asia’s woes.
Early today many Asian currencies and markets fell further. Indonesia’s currency, the rupiah, sank to 9,000 to the dollar, a new low. Among stock markets, the Philippines’ main index tumbled 6.3% early today. Hong Kong was off 2.1%, and Indonesia lost 5.3%.
On Wall Street on Wednesday, fears about weakening corporate earnings were revived after Atmel Corp., a semiconductor maker, said it would report a fourth-quarter loss because some customers in Asia haven’t been able to finance purchases. Atmel shares sank $2 to $17.38, dragging the rest of the tech sector lower.
Higher bond yields also weighed on stock prices, as the bond rally that pushed yields to all-time lows screeched to a halt as investors reassessed their optimistic tone and also worried about a decline in the dollar.
Surging issuance of new bonds by major companies, and jitters ahead of Friday’s U.S. employment report for December, also hurt the bond market.
The yield on the 30-year Treasury bond jumped to 5.78% from Tuesday’s 20-year low of 5.71%.
The dollar declined against the Japanese yen after a meeting between Federal Reserve Board Chairman Alan Greenspan and Japanese Vice Finance Minister for International Affairs Eisuke Sakakibara triggered worries that Tokyo and Washington would try to halt the dollar’s recent rise against the yen.
In New York, the dollar fell to 131.25 yen from 133.65 Tuesday.
Late in the day, a Japanese official said intervention in the foreign exchange meeting was not discussed by U.S. and Japanese policymakers.
On Wall Street, analysts said cash inflows into stock mutual funds remain strong, and the chance to buy blue chip stocks at cheap prices proved too tempting late in the day.
Even so, fears remain high that Atmel will be joined by many other companies hurt by Asia-related earnings problems, analysts say.
Among Wednesday’s market highlights:
* Other tech issues off sharply included Apple, down $1.44 to $17.50; Dell, down $2.19 to $86.25; Texas Instruments, off $1.69 to $45.63; Oracle, down $1.56 to $21.13; and Applied Materials, down $1.75 to $29.50.
* Bucking the technology trend, Structural Dynamics Research surged $3.44 to $25.88 after the Cincinnati-based maker of computer-aided design software said Japan’s Nissan Motor will invest more than $100 million over seven years in its products and services.
* Financial stocks were hit again, led by Wells Fargo, down $6.63 to $321.28; BankBoston, off $2.44 to $92.19; and Merrill Lynch, down $1.56 to $68.88.
Savings and loan shares down sharply included Washington Mutual, off $1.72 to $61.22, and H.F. Ahmanson, down $3.88 to $57.88.
* Oil stocks rebounded after sharp losses earlier in the week. Chevron gained $2.63 to $76.38 and Exxon rose $1.88 to $60.88.
But some natural-gas utilities slid as gas prices declined further amid warm Eastern weather. Columbia Gas dropped $2.44 to $72.44.
* Restaurant chain Rainforest Cafe plunged $12.19 to $18.56 after saying that its fourth-quarter profit would fall short of Wall Street expectations.
* Among retailers, Best Buy jumped $3.88 to $41.75 after the electronics retailer said fourth-quarter earnings should be $1 a share, 37% higher than forecasts, thanks to strong holiday sales.
Rival Circuit City Stores, which reported a 13% rise in total sales but a 1% decline in same-store sales for December, rose 75 cents to $35.44.
* Black & Decker surged $3.56 to $41.88. The company said it will have better-than-expected 1997 earnings of $2.33 to $2.35 a share because of strong sales of new products, such as its VersaPak cordless power tools.
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Market Roundup, D9
