Investors Can’t Shake Off Asia; Dow Slides 78
The U.S. stock market ended broadly lower Wednesday as troubles ranging from slumping world markets to a potentially costly court ruling against a big tobacco company outweighed reassuring comments from Federal Reserve Board chief Alan Greenspan.
A late-day sell-off chopped 78.22 points, or 0.9%, from the Dow Jones industrial average, which closed at 8971.70. Meanwhile, bad profit news from several tech companies caused the Nasdaq composite index to shed 27.51 points, or 1.5%, to end at 1773.25.
Meanwhile, Asian stock markets sank as the U.S. dollar climbed to a new seven-year high against the Japanese yen, sparking fears that China would soon be forced to devalue its currency. Southeast Asian currencies also sank against the U.S. dollar.
Asian markets and currencies continued falling today.
The fresh bout of overseas selling dropped several foreign markets to multi-year lows. Investors continued to worry that Japan’s sagging economy will cut into that country’s spending and investment in other Asian nations.
Hong Kong’s main stock index fell 4.9%, its lowest point in three years. Seoul’s market tumbled 4.3%, indexes in Kuala Lumpur and Taipei each slipped 3.1% and Toyko’s slid 1.2%. The main Bangkok index fell 5.2% to a 10 1/2-year low, while the main index in Singapore weakened 4.4% to a 9 1/2-year low.
The weakness in the U.S. spread across the market. Declining stocks outnumbered advancers by a 2-1 ratio on the New York Stock Exchange on an 8.2% pickup in volume from Tuesday.
In an appearance before the Joint Economic Committee, Greenspan told Congress that the nation is enjoying low unemployment and controlled inflation. The central bank chief indicated that he was not preparing an interest-rate boost any time soon, a sentiment that cheered fixed-income investors who responded by sending bond yields lower.
The yield on the 30-year Treasury bond fell to 5.70%, down from 5.78% on Tuesday. It’s within striking distance of its January mark of 5.66%, which was the lowest yield since the government began regular sales of the securities in 1997.
“Everything Greenspan said was really everything we wanted to hear,” said John Lynch, director of investment strategy at Interstate/Johnson Lane in Charlotte, N.C.
Some analysts said, however, that Greenspan’s remarks were predictable since a boost in U.S. interest rates would exacerbate the tumult in Asia by drawing more investment capital away from that region.
Greenspan’s comments helped erase an early 47-point loss on the Dow. But several factors weighed on stocks through the course of the day, especially the troubles overseas.
The major factor concerning investors recently has been the Japanese yen, which sank Wednesday. The dollar moved as high as 141.57 yen during trading in Japan, its highest level since June 1991.
The dollar ended at 141.43 yen, up from 141.35 Tuesday.
The yen’s fall has made the price of Japanese exports cheaper in foreign markets. Investors worry that a further drop in the yen will force Japan’s neighbors, including China, to devalue their currencies to remain competitive.
Russian stocks plunged 5.60% after the Group of Seven nations ended financial talks without a clear commitment to support the besieged yen or provide extra bailout loans to Russia.
Additional nervousness about the world’s willingness to stabilize the Asian economic crisis followed comments by South Korean President Kim Dae Jung, who addressed a joint session of Congress, calling for approval of fresh funds for the International Monetary Fund so it can continue to provide “critical” support for Korea and other troubled economies.
Among Wednesday’s highlights:
* Tobacco stocks took a tumble after a Florida jury found cigarette maker Brown & Williamson liable for conspiracy and other charges in the death of a longtime smoker and awarded his family $1 million in damages.
Philip Morris, a Dow component, fell $1.88 to close at $38.38. BAT Industries, parent of B&W;, lost 63 cents to $19.56 and RJR Nabisco Holdings sank 88 cents to $26.
* The stocks of several companies fell after they warned that quarterly earnings will fall shy of analyst estimates.
Lattice Semiconductor sank $9.50 to $27 after the company said revenue and earnings for the quarter will fall more than expected because of slowing demand for its computer chips, especially in Asia. The company makes chips for computer networking equipment and other communications gear.
“The semiconductor companies have the most exposure to Asian-related weakness,” said Philip Orlando, chief investment officer at Value Line Asset Management Inc. “Things are getting worse there.”
The Philadelphia Stock Exchange’s semiconductor index dropped 6.90%, its biggest setback since the stock market fell sharply on Oct. 27. Intel lost $1.63 to $68.56, Applied Materials gave up $1.38 to $28.75 and Texas Instruments $3.38 to $52.50.
* Companies with exposure to Asia got hit hard. 3M tumbled after an analyst downgraded the stock. Morgan Stanley Dean Witter & Co. analyst Mark Gulley cut his rating on 3M to “neutral” from “outperform,” in part because the company gets 25% of its earnings from the Pacific Rim. Boeing fell 63 cents to $45.38 after the aircraft maker said it could cut jobs because Asia’s turmoil has prompted airlines to delay deliveries and order smaller plans.
United Technologies, maker of Otis elevators and Pratt & Whitney jet engines, gets a fifth of its revenue from Asia, fell $3.69 to $87.25, and Caterpillar lost $2.44 to $53.88.
* A day after saying its quarterly loss will be larger-than-expected because of deep price cuts and slower sales, shares of Western Digital slumped $4.31, 28%, to $11.19. Read-Rite sank 75 cents, or 9%, to $7.56 after saying that it also would fall short of analysts’ quarterly projections.
* Inktomi, a 2-year-old San Mateo company that makes software designed to reduce Web congestion as well as a popular Internet search engine, doubled on its first day of trading, reflecting continued enthusiasm for Internet stocks. It surged $18 to $36.
Market Roundup, D10
