Stocks Sink Worldwide on Asia Worries
Asia’s economic woes deepened Thursday, triggering yet another broad decline in stock markets worldwide.
Meanwhile, short-term U.S. interest rates tumbled after a Federal Reserve governor held out the possibility of a Fed cut in short rates if the Asian crisis has worse-than-expected effects on the U.S. economy.
On Wall Street the Dow Jones industrial average surrendered 99.65 points, or 1.2%, to close at 7,802.62, following another devastating selloff overnight in Asia.
Concern that Indonesia’s financial bailout may unravel--because President Suharto’s regime is balking at major financial reforms demanded by the International Monetary Fund--raised fears of political and social unrest in the populous Southeast Asian nation. (Main story, A1.)
Indonesia’s currency plunged 22% on Thursday to new lows and its main stock market index sank 12%, to 347.11
In other Asian markets on Thursday, Singapore’s main share index dove 7.1%, Hong Kong’s slumped 3% and Malaysia’s was down 2.7%. Japan’s market, however, was off only marginally.
Early today the selling continued across Asia.
Investors turned bearish in Europe and Latin America as well on Thursday, concerned that the seemingly endless downward spiral of Asia’s markets--which have been falling, for the most part, for the past six months--is threatening to slash global economic growth.
Germany’s main stock index fell 1% on Thursday, while the French index lost 1.7%. In Latin America, the Mexican stock market was down 2.1% while Argentina’s market slumped 3.2%.
In U.S. trading losers outnumbered winners by 19 to 11 on the New York Stock Exchange in heavy trading. Losers had a 24-to-18 edge on Nasdaq.
But most broad market indexes fell less than the Dow in percentage terms. The Russell 2,000 index of smaller stocks was off 1%. The Nasdaq composite, heavy with tech issues, eased just 0.4% to 1,555.64 as some tech issues gained.
Still, “Corporate profits are in question, valuations are extreme and the economic background is shaky, particularly in Asia,” said Henry G. Van der Eb, president of Mathers & Co. in Bannockburn, Ill., which oversees $200 million. “We’re headed for the first down January in a while.”
Stocks of “cyclical” industrial companies whose fortunes are tied to the economy’s swings were particularly hard-hit Thursday, suggesting deepening worries about a global slowdown.
Stocks all but ignored more good news on inflation, as wholesale prices fell unexpectedly in December, and dropped 1.2% for 1997.
In other economic news, the Fed reported that consumer installment credit fell by $4.2 billion in November, the first decrease since May 1993--which suggested that consumers may have grown cautious about their debt levels.
The bond market seemed to like both of those reports. More important, Fed Gov. Laurence Meyer said in a speech that while he doesn’t foresee serious U.S. deflation stemming from Asia’s woes, “A much larger spillover from the Asian crisis could encourage an easing” of credit by the Fed.
Those supportive words helped send shorter-term interest rates sharply lower. The yield on 3-month Treasury bills fell to 5.09% from 5.22% on Wednesday. The 1-year T-bill yield sank to 5.17% from 5.29% Wednesday.
Meanwhile, the yield on the 30-year Treasury bond dropped to 5.74% from 5.78%.
The Treasury also met with better-than-expected demand at its auction of $8 billion of 10-year inflation indexed notes. The notes were sold at a yield of 3.73%, below the 3.78% yield forecast by traders.
Still, demand for the securities was below the average at the first two such sales.
Among Thursday’s highlights:
* Cyclical stocks falling sharply included Chrysler, down $2.50 to $32.50; Ford Motor, off $2.06 to $45.06; Chevron, down $2.88 to $73.50; and Georgia-Pacific, off $3.63 to $55.19.
Also, Alcoa slumped $3 to $68 despite reporting fourth-quarter operating earnings of $1.08 a share, up 18% from a year ago.
* Financial stocks also were slammed. Tumbling currencies in Asia are expected to stunt banks’ trading profits and increase the chances that businesses won’t be able to pay back foreign currency-denominated loans, analysts said.
Citicorp fell $4.38 to $117.75, Chase Manhattan dropped $4.19 to $104.19 and BankAmerica lost $1.63 to $66.
* In the tech sector, Seagate fell $1.38 to $19.25 after warning of a “substantial” fiscal second-quarter loss from operations because of steep price declines in disk drives.
But buyers pushed Intel up $1.56 to $74.31, Computer Sciences up $2.38 to $88, Cisco Systems up 63 cents to $56.13 and Micron Technology up $1.88 to $28.38.
* Among Asia-related shares traded in New York, Indonesia Fund sank 63 cents to $4; Indosat plunged $3.19 to $11.38.
Market Roundup, D6
