Stocks and Oil Slide; T-Bond Rises to 5.87%
U.S. markets sent mixed signals on Thursday, as stocks and oil prices fell in part on economic worries, while bond yields rose amid unexpectedly strong housing-market data.
Meanwhile, in Asia today stock markets were mixed after heavy selloffs on Thursday. Indonesia’s currency, the rupiah, continued to sink to new lows.
On Wall Street on Thursday the Dow industrials gave up 63.52 points, or 0.8%, to 7,730.88, as the market closed broadly lower for a second straight session.
Losers outnumbered winners by 25 to 17 on Nasdaq and by 18 to 11 on the New York Stock Exchange.
Among broad indexes, the Standard & Poor’s 500 fell 0.8% to 963.04; the Russell 2,000 index of smaller stocks fell 0.9% to 426.20.
Energy stocks led the market lower, as near-term crude oil futures in New York sank 32 cents to $16.04 a barrel--the lowest price since April 1994.
Crude was pushed down by data showing a surge in U.S. oil inventories, at a time when economic growth is expected to begin to slow because of fallout from Asia’s economic disaster.
The American Petroleum Institute said U.S. oil inventories jumped by 14.64 million barrels to 318.09 million barrels in the week ending Jan. 16, an increase three times larger than expected.
Reports that Saudi Arabia had violated its OPEC quota and would not cut production to boost oil prices further depressed prices.
Energy stocks, already falling because of the decline in crude prices, were hit even harder after oil-field-services giant Schlumberger reported disappointing quarterly earnings and warned that its customers may cut spending because of lower oil prices. Schlumberger shares dove $9.94 to $71.56. The stock recently traded at $94.44.
Although lower energy prices would ordinarily be considered bullish for the stock market overall--by reducing inflation pressures--the weakness in oil prices is reminding investors about the potential for a greater-than-expected economic slowdown, analysts say.
Those worries were compounded by some weak corporate earnings reports on Thursday from companies such as Sears, which fell 88 cents to $45.06; and specialty semiconductor maker Altera, which fell $3.63 to $30.94 after saying it is being hurt by a slowdown in orders from Asia.
“Any company that reports disappointing earnings is getting killed,” said Chip Otness, a money manager at J.P. Morgan Investment Management in New York.
Another decline in Asian stock markets on Thursday also set a weak tone for Wall Street.
A slide in Indonesia’s currency to record lows helped push the Hong Kong stock market down 3.9% on Thursday, South Korea’s market down 4.5% and Singapore’s down 3.2%.
In late morning today, as the rupiah again traded at record lows of about 14,000 to the dollar, Hong Kong’s market was modestly lower, while Singapore’s key share index was off 1.5%. The South Korean market was up 0.8%.
While the U.S. stock and energy markets worried about weaker economic growth, the bond market Thursday had the opposite concern.
Long-term bond yields rose to three-week highs after the government reported surprisingly strong home-building data for December. Also, word of record mortgage-refinancing activity suggests consumer spending could be better than anticipated this year.
That pushed the yield on the bellwether 30-year Treasury bond from 5.81% on Wednesday to 5.87% on Thursday, the highest since Dec. 31.
Among Thursday’s highlights:
* Energy stocks tumbling included Exxon, down $1.50 to $59.56; Atlantic Richfield, down $1.81 to $75.56; Halliburton, down $4.63 to $43.50; Western Atlas, down $5.31 to $60.56; and Dresser Industries, down $2.63 to $35.75.
* Tobacco shares were down sharply on worries that President Clinton’s latest legal troubles might jeopardize the industry’s proposed health-liability settlement, and as documents released in a Minnesota trial also suggested the settlement could be in trouble.
Philip Morris tumbled $2.31 to $41.94 while RJR Nabisco sank $1 to $33.81.
* Tech issues suffering because of earnings disappointments included Sybase, down $1.92 to $7.77; Silicon Graphics, down 50 cents to $11.25; and Iomega, which plummeted $4.17 to $9.02 after reporting quarterly earnings of 13 cents a share, 2 cents below expectations, in part because of slower Asian demand for its memory devices.
But Microsoft rose $1.63 to $138.63 in the wake of its earnings report, and after it said it settled a contempt charge with the government.
* Newhall Land & Farming dropped $1.31 to $28.69 after the real estate development company said first-quarter earnings are “expected to be minimal.”
* Planet Hollywood plunged $3.31 to $7.13. The movie-theme restaurant chain said fourth-quarter and 1998 earnings will be far below expectations because sales are slumping.
* Another big loser was Robert Mondavi, whose shares tumbled $7.69 to $40.13 after the winemaker warned that fiscal third-quarter sales and earnings will suffer because of a chardonnay shortage.
Mondavi has been particularly hurt by a shortage of chardonnay due to small grape crops in 1995 and 1996 because of bad weather. The firm said the problem won’t be alleviated for 45 to 50 days until the 1997 chardonnay, from a bumper crop, is released.
* On the plus side, United Technologies jumped $3 to $74.63 after the aerospace and automotive parts maker’s earnings beat estimates.
Market Roundup, D7
