Indonesia Woes Send World Stocks Tumbling
Indonesia’s economic woes hit Asian stocks hard Friday, and the selling spilled across Europe to the United States, as worries about Jakarta’s ability to pay its debts unnerved investors around the world.
U.S. investors sought safety in bonds and braced for a week that will offer a first glimpse at how sick American company profits will get from the Asian flu when corporate earnings begin rolling out.
The Dow Jones industrial average ended down 222.20 points, or 2.8%, at 7,580.42. For the week, it was off 384.62, a record weekly loss. In the broader market, declining issues swamped advances 5 to 1 in heavy trading of 745 million shares on the New York Stock Exchange. The Standard & Poor’s 500 index fell 28.35, or 3.0%, to 927.69.
“We just don’t know how the Asian crisis is going to affect earnings. There’s a sense of ‘shoot first, ask questions later,’ ” said Sam Stovall, analyst for Standard & Poor’s industry reports.
Asian stock markets slumped anew, prompting investors in the region and elsewhere to wonder if Asia’s financial problems were being addressed adequately by policymakers.
Stocks in Singapore, one of Asia’s healthiest economies, fell 7.4%, while shares in the Philippines fell 8.3%. Analysts said Philippine shares were also hurt by central bank comments implying higher interest rates.
Hong Kong’s benchmark Hang Seng stock index fell 3.9%, stocks in Thailand lost 2.9%, and South Korea’s market fell 2.4%.
Japan stocks were spared, however, on news that officials were preparing a massive rescue for the country’s ailing financial system. The 225-share Nikkei average ended off a scant 0.2%.
But Mexico City’s stock index, the bolsa, plummeted 5.98% in the biggest single-day plunge in two months as Asia’s slump spread to Latin America. Brazil’s Bovespa in Sao Paulo also suffered a 5.58% drop.
In Europe, London’s FTSE-100 fell 1.9%, and Frankfurt’s DAX tumbled 2.5%.
Although the mood remained tense throughout global markets, the Indonesian rupiah recovered to about 8,000 to the U.S. dollar from a low of 10,200 earlier in the session.
In the U.S., technology stocks, which rely more heavily on Asia for revenue growth, were also hit hard. The technology-laden Nasdaq composite index fell 52.35 points--its second-biggest point loss ever--or 3.37%, to 1,503.22.
As U.S. stocks slid, the closely watched 30-year Treasury bond edged up slightly, pushing its yield down to 5.73% from 5.74% Thursday. Bond prices and yields move in opposite directions.
Allen Sinai, chief global economist for Primark Decision Economics, said a lot of money that normally flows into the stock market in January was being diverted into bonds because of the nervousness surrounding the Asian crisis.
“That sends a very bearish message,” he said.
U.S. financial markets were also unnerved by a surprise show of strength in the job market in December, which rose slightly to 4.7% from 4.6% in November. That pushed the average jobless rate for 1997 to 4.9%, the lowest since 1973.
Among Friday’s highlights:
* A profit warning by computer component supplier Adaptec added to the earnings jitters. Its stock plummeted 40%, closing down $14.38 at $21.56.
Computer makers fell a day after Dell cut prices for corporate PCs by as much as 15%. Dell lost $3 to $83.19. IBM fell $4.13 to $100.06, Hewlett-Packard fell $3.19 to $62, Sun fell $1.75 to $40.88 and Compaq fell $2.38 to $56.94.
Market Roundup, D4
