Stocks Sink on IBM’s Loss; Dollar Takes a Hard Fall

Wall Street stocks tumbled Wednesday and the dollar fell off recent historic highs against the Japanese yen as fallout from Asia’s currency crisis hit close to home.

Stocks reeled after computer giant IBM said the Asian currency crisis eroded its profit and could hurt future results.

The Dow Jones industrial average, which fell as much as 130 points during the session, ended down 78.72 points, or 1%, at 7,794.40, wiping out a big chunk of Tuesday’s 120-point gain.

Broad-market indicators also surrendered much of Tuesday’s gains despite some better-than-expected fourth-quarter profit reports from Dow components Caterpillar and Exxon, as well as Compaq Computer and Delta Air Lines.

The reports did little to distract attention from late Tuesday’s news that IBM posted a disappointing fourth-quarter profit and warned that its results are still being hurt by slack consumer demand in Asia and a strong dollar. Weak foreign currencies make revenues from overseas operations worth less when converted to dollars.

“The IBM story is the market in a microcosm--we are still very worried about Asia,” said Courtney Smith, chief investment officer for Orbitex Management. “We are going to have to get through the earnings season before we can really turn around.”

IBM fell $8.25 to $100.13 in heavy trading.

Surprisingly, IBM’s slide was accompanied by only scattered losses in the computer sector. The technology-heavy Nasdaq composite index fell only 2.22 points, or slightly more than a tenth of a percent, to 1,587.92.

Declining issues outnumbered advancers by an 11-7 margin on the New York Stock Exchange, where volume totaled 626.22 million shares, the 11th time in 13 sessions this year that more than 600 million shares have changed hands.

The Standard & Poor’s 500-stock list fell 7.79 points to 970.81 and the NYSE composite index fell 4.02 points to 507.90. The Russell 2000 index of smaller companies fell 1.42 points to 429.89.

Stocks’ downward move helped boost bonds and U.S. treasuries posted their first winning session in more than a week.

The price of the benchmark 30-year bond rose, while its yield dipped to 5.81% from 5.84% Tuesday.

It was the first decline in bond yields since Jan. 12.

Among Wednesday’s highlights:

* The renewed worries about Asia weighed heavily on financial shares, the other group considered particularly vulnerable to the crisis. J.P. Morgan, which on Tuesday reported weaker-than-expected profit, fell $3.88 to $101.38 as the Dow’s second-biggest decliner after IBM.

Citicorp fell $2 to $117, Chase Manhattan fell $2.06 to $105.13 and Merrill Lynch fell 25 cents to $64.75. Wells Fargo dropped $14.06 to $315.69.

* Drug shares retreated after rallying Tuesday, as euphoria cooled over a possible merger of SmithKline Beecham and American Home Products.

SmithKline Beecham fell $2.44 to $57.13 and American Home fell $3.69 to $90.56 after jumping $13.56 Tuesday. Pfizer fell $1.81 to $79 and Merck lost $1.50 to $114.

* Despite IBM’s woes, there were some tech gains. Compaq rose $2.38 to $32.19, and Texas Instruments rose $1.75 to $48 despite posting disappointing fourth-quarter results.

Intel rose 56 cents to $76.69, Dell Computer rose $1.38 to $94.25, and Microsoft slipped 81 cents to $137 in advance of its profit report.

In currency trading, the dollar fell sharply against the Japanese yen amid renewed talk that Japan would intervene to stem its currency’s weakness.

The dollar got a brief lift early in the day after the Commerce Department said the U.S. trade deficit shrank 11.6% to $8.04 billion in November, despite forecasts of a rise.

However, the U.S. currency’s decline, which extended the dollar’s pullback from recent 5 1/2-year highs against the yen, started overseas amid reports that Eisuke Sakakibara, an influential official at the Ministry of Finance, said Japan was considering selling dollars for yen in the currency markets. Japan intervened in record amounts last month to curb weakness in its currency.

The dollar closed at 127.15 yen in New York, down from 128.40 at Tuesday’s close.

Overseas, Tokyo’s Nikkei stock index rose 1.9% for its sixth straight gain. The Nikkei has gained 13.8% over that span after sinking to a 2 1/2-year low a week ago Monday.

In Europe, Frankfurt’s DAX index fell 0.6% and London’s FTSE-100 fell 0.1%.

Market Roundup, D8