Doubts About Japan Shoot Down the Dow
Blue-chip stocks fell sharply Friday amid doubts that decisive action to revive Japan’s economy would come soon enough to help U.S. corporate earnings. But bonds rose and the dollar continued its drop against the yen after Wednesday’s U.S. intervention to prop up the Japanese currency.
The Dow Jones industrial average fell 100.14 points, or 1.14%, to close at 8,712.87, ending the week down 122.07 points.
The sell-off was exacerbated by the “triple witching” quarterly expiration of stock options and futures.
It was the third big swing of the week for the Dow, which had plunged 207 points on Monday and rebounded 164 points on Wednesday.
The tech-heavy Nasdaq index ended 8.59 points higher at 1,781.29, a 36.24-point gain for the week. But most broad-market indexes also retreated toward Friday’s close despite pledges from U.S. and Japanese leaders to intervene again if necessary on the yen’s behalf.
The Standard & Poor’s 500 fell 5.72 points to 1,100.65. The NYSE composite index fell 3.57 points to 563.92, and the Russell 2,000 index of smaller companies fell 1.32 points to 438.42.
Declining issues outnumbered advancers 3 to 2 on the New York Stock Exchange, where volume totaled 826 million shares.
On Wednesday, the Federal Reserve sold dollars for Japanese yen for the first time since 1992, helping the beleaguered currency reverse a slide to an eight-year low.
The Fed’s move bolstered market confidence but may not have any lasting impact unless Japan acts more aggressively to end its recession, which threatens the global economy and hinders recovery elsewhere in Asia.
Analysts will be paying close attention this weekend as Japan plays host to a meeting of finance officials from the Group of Seven industrialized nations to discuss the Asian situation.
“The world is hoping that Japan will come to the table with some concrete and significant proposals for how it might stimulate its domestic economy,” said Charles Crane, chief market strategist at Key Asset Management.
Asian markets pulled back Friday after rallying sharply the previous day. Tokyo’s Nikkei stock average fell 0.6%, while share prices fell 4.8% in the Philippines, 3.8% in South Korea, 3.7% in Thailand and 3.3% in Indonesia.
Also weighing on investors Friday were remarks by Treasury Secretary Robert E. Rubin, who said there will be no quick fix for Japan’s problems at the G-7 meeting.
“These are complex problems. They are not simple problems,” Rubin said. Action plans will “take time,” he added.
The yen fell and U.S. bonds rose on Rubin’s comments. The dollar rose to just under 137 yen after dipping to a one-month low of below 134 overnight. But in late New York trading, the dollar slipped back to 136.10 yen from 137.83 on Thursday.
The 30-year Treasury bond gained, pushing the yield, which moves in the opposite direction of its price, down to 5.66% from 5.69% on Thursday.
“The bond market was down sharply and the fact it came back at the end of day and the stock market got weaker shows there is still some nervousness in the market about Asia and corporate earnings,” said Peter Gottlieb, a portfolio manager in Chicago at First Albany Asset Management.
Among Friday’s highlights:
* Nasdaq was led higher by Microsoft, up $3.50 to $94.69, after Goldman Sachs raised its profit forecast for the software maker. But Disney fell $4.44 to $107.56 as the Dow’s biggest decliner after Goldman lowered its projections for the media company.
* Also helping Nasdaq was WorldCom, up $1.31 to $47.06. European Union regulators plan to approve the company’s proposed $42.7-billion purchase of MCI Communications in the next few days after MCI answers further questions on its offer to sell its Internet business, an EU official close to the negotiations said. MCI rose $1.81 to $56.50.
* Employment services company Hall, Kinion & Associates plunged $5.38 to $7.63 after the provider of skilled workers to high-tech companies warned that its second-quarter earnings will fall short of analysts’ estimates due to a shortage of qualified workers.
Market Roundup, D4
* NO QUICK FIX: Fixing Japan will take time, Treasury Secretary Robert Rubin warned. D2
